Victim of fraud - what about taxes on the unauthorized stock sale?

Question

I was recently a victim of fraud on my investment account. Someone gained access and sold multiple stocks and also transferred money to their bank account. The brokerage firm is investigating and I'm expecting to get the withdrawn money refunded to me. They also mentioned the possibly of "correcting" the unauthorized trades.
I'm wondering how this will look for end of the year taxes. Should I expect it to look like I sold the stock, then re-bought it? What will it look like on my 1099 forms, if they don't correct the issue until after the end of the year?

Bob Baerker · Answer

Interesting situation that I don't know the answer to.
What it will look like on your 1099 forms will depend on whether the sale was for a loss of for a gain and when and how the stock is restored to your account.
For example, if you sold at a loss and the stock is restored as a purchase within 30 days, you'll have a wash sale.  That's no more than an accounting issue since you'll have to carry the loss forward and it won't affect your taxes.  If after 30 days then you get a deduction but might lose LTCG status, or at least accrued time toward it.  Conversely, if sold for a large gain, you'll have to pay unnecessary taxes this year.
The ideal situation would be if your broker can just cancel the sell trade and reverse the removal of your stocks from your account.  Speak to them ASAP to see what the customary procedure is for such situations and if the 1099 headache(s) can be avoided.

Victim of fraud - what about taxes on the unauthorized stock sale?

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