PROBLEM:

You know you’ve heard your debtor tell friends that some of his best investments were in commodity futures contracts, but you have no way of knowing just how much money he has invested in them.

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SOLUTION:

We’ve blogged before here about tracking down your debtor’s investments in the stock market, but you’re right to suspect that he may have also made some higher risk investments in the futures exchanges. Fortunately, you can asset search, commodities, futures, commodity futures contractslook to similar places to figure out where he has his investments, and the greatest help to you will again be your debtor’s tax returns.

Investing in futures is risky.  These investments are highly leveraged, meaning the potential for loss is enormous.  But high risk can also mean high reward.  If your debtor has made big investments in commodities futures, there is potential that he’s made a pretty large amount of money off of them.  If you don’t have access to your debtor’s tax return, you should be able to request the return from the IRS if you filed jointly with your debtor.  Otherwise, you may have to wait until the court’s discovery process to take a look.

Your debtor’s 1040 is always a good place to begin and should help point you in the right direction.  If any capital gains or losses are reported, you’re going to want to dig deeper.  Find your debtor’s 1099B forms.  Your debtor’s brokers are responsible for sending this form both to your debtor and the IRS.  Boxes 9-12 on the 1099B will give you profit and loss figures for your debtor’s futures contracts.  Even though the nature of futures is that they contemplate certain future events, the value of your debtor’s futures will be reported regardless of whether your debtor has open positions at the time he filed the return.  Next, drill down into your debtors IRS Form 6871 where commodity futures profits and losses should have been reported by your debtor.

If you don’t have access to your debtor’s tax refund, see if you can find anything on your family computer.  We never advocate using a computer without authorization, but if you share a computer with your debtor, you just might find that he has information about his investment portfolio on it.

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