What would the IRS do if my portfolio went to near zero but I owe them tax?

Question

I invested my entire net worth of 1 million dollars in stock XYZ on Jan 1st.
The price of XYZ doubled by Dec 30th. I sold all of my shares on that day.
My net worth is now 2 million, of which 1 million is short term capital gains.
On Dec 31st, I invested all of the 2 million on XYZ again because the price went down significantly.
On Jan 1st of next year, the price of XYZ went to near zero.
Thus my net worth is effectively zero.
The IRS will collect tax on my 1 million capital gains. I won't be able to pay.
What will happen?

Mike Scott · Answer

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.

Answered by Mike Scott on April 3, 2021

What would the IRS do if my portfolio went to near zero but I owe them tax?

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