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  1. I invested my entire net worth of 1 million dollars in stock XYZ on Jan 1st.
  2. The price of XYZ doubled by Dec 30th. I sold all of my shares on that day.
  3. My net worth is now 2 million, of which 1 million is short term capital gains.
  4. On Dec 31st, I invested all of the 2 million on XYZ again because the price went down significantly.
  5. On Jan 1st of next year, the price of XYZ went to near zero.
  6. Thus my net worth is effectively zero.
  7. The IRS will collect tax on my 1 million capital gains. I won't be able to pay.
  8. What will happen?
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    Hopefully an adult takes away your access to a brokerage firm :->) Jan 30, 2021 at 20:51
  • What do you think should happen? Since when was "but I don't have it right now" a sufficient excuse to not pay a tax?
    – quid
    Jan 31, 2021 at 7:19
  • @quid But in reality I lost money. Thus, there is no capital gains. There is only capital loss. Jan 31, 2021 at 18:02
  • There was a $1mm capital gain.
    – quid
    Feb 1, 2021 at 2:22

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You’ll be forced into bankruptcy and lose most of your assets. Never invest money that you will need to pay taxes in anything riskier than a money-market fund or AAA-rated government bonds, in the currency in which you’ll be paying your taxes.

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  • Does being forced into bankruptcy mean that I don't have to pay the IRS? Jan 30, 2021 at 21:10
  • @code_life possibly. Google has everything you need to know: "tax debt discharge personal bankruptcy".
    – RonJohn
    Jan 30, 2021 at 21:23
  • @code_life it absolutely does not mean that.
    – quid
    Jan 31, 2021 at 7:20

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