Will tax software like TurboTax handle this crypto/stock offset correctly? Or do I need something more specialized?

This is exactly the kind of situation where having proper documentation is crucial. I went through something similar last year - had about $8k in stock losses carried forward from 2022 and realized $12k in crypto gains in 2023. The good news is yes, you can absolutely offset them. Both are treated as capital assets on Schedule D. What saved me was keeping detailed records of every transaction - dates, amounts, cost basis, etc. The IRS doesn't care whether your losses came from Apple stock or your gains came from Bitcoin - they're all capital transactions. One thing to watch out for: if you're actively trading both stocks and crypto, make sure you're not running into wash sale rules. The IRS hasn't explicitly applied wash sales to crypto yet, but it's something to be aware of if you're buying and selling similar assets within 30 days. Also, since you mentioned needing an answer "ASAP" - if you're planning to realize those crypto gains before year end, consider the timing. You might want to realize them in smaller chunks to see exactly how much of your carryforward you'll use up, especially if you think you might have more gains or losses next year.

Has anyone here used their IRA money for closing costs instead of the down payment? My lender said that could be a smarter way to use the funds since my down payment affects my loan terms but closing costs are just out of pocket.

@Mateo Martinez - I went through this exact same situation about 6 months ago! Here's what I learned that might help you make the decision: First, definitely confirm you qualify as a "first-time buyer" - the IRS definition is pretty generous (no home ownership in past 2 years). The $10,000 penalty-free limit per person is accurate, so if your wife has an IRA too, you could potentially access $20,000 total. One thing I wish I'd considered more carefully is the timing. You have to use the IRA funds within 120 days of withdrawal for home purchase, so make sure your house hunting timeline aligns with that. Also, even though you avoid the 10% penalty, you'll still owe regular income tax on the withdrawal, which could bump you into a higher tax bracket depending on your income. Given your price range ($340-380k), pulling $20-30k from IRAs for a 10% down payment seems reasonable, but I'd strongly suggest running the numbers on how this affects your 2025 taxes first. The withdrawal gets added to your regular income for that year. Have you looked into any state or local first-time homebuyer programs? Some offer grants or low-interest loans that might reduce how much you need from your IRA. Good luck with the house hunt!

I'm actually more concerned about the attempt to serve papers at an address where you don't permanently live. From my understanding (not a lawyer), proper service usually requires delivering documents to your actual residence. If you're officially residing in Mexico, there are international protocols for serving US legal papers to someone in Mexico. It sounds like they're trying to serve you at a US address of convenience, which might not constitute proper service. You might want to research the "Hague Service Convention" which covers international service of process between the US and Mexico.

The international service of process angle is crucial here, but I want to clarify something - you mentioned you're in Peru, not Mexico. The Hague Service Convention does apply between the US and Peru, so if you're truly residing there permanently, any US legal action would need to follow proper international service procedures. However, there's an important distinction to consider. If you've been using your cousin's address as your official address for taxes, banking, and other legal purposes, courts might consider that your legal domicile for service purposes, even if you physically reside abroad. This is called "substituted service" and many jurisdictions allow it when the defendant has designated an address for official correspondence. Given that you mentioned maintaining US residency status and using the cousin's address for "all official mail," you might have inadvertently created a situation where service at that address could be considered proper. I'd recommend consulting with an attorney who handles international service issues before assuming you have protection under improper service rules. The key question is whether you've been filing taxes as a US resident (using that address) or as a US citizen abroad. This designation could significantly impact how courts view proper service in your case.

Don't overcomplicate this. I've been audited twice specifically on gambling losses. What worked for me was using the Notes app on my phone with this simple format: - DATE: 9/15/23 - CASINO: Bellagio - GAMES: Blackjack 4hrs ($3k loss), Craps 1hr ($500 win) - SESSION TOTAL: -$2,500 - YEARLY RUNNING TOTAL: -$8,750 I take 30 seconds to update this between games or when I take breaks. If you use your player's card, also request annual win/loss statements from the casinos as supporting documentation. The key is consistency - log EVERY session, even the winning ones.

As someone who's been through multiple IRS audits for gambling losses, I can tell you that your instinct to be more detailed is correct. A single entry like "lost $2,800 playing blackjack" won't hold up under scrutiny. Here's what has worked for me at live casinos: I use my phone's voice memo feature during bathroom breaks or when getting drinks. I just record something like "3:30 PM, blackjack table 7, bought in $500, currently down $200" and then transcribe it later into a proper log. This way I'm not disrupting play but still capturing the key details. The IRS wants to see that you're systematically tracking gambling activity, not just remembering losses at tax time. Your online records are perfect examples of the detail level they expect. For casino play, aim for: date/time, specific location, game type, buy-in amounts, session duration, and win/loss per session. One tip: if you're a regular at certain casinos, ask the pit boss about their player tracking systems. Some will provide session-level detail if you use your card consistently, which can supplement your own records.

This has been such a comprehensive and helpful discussion! As someone who's dealt with similar contingent payment debt situations in my family, I wanted to add one more practical tip that might help others. When you're gathering documentation from the financial advisor or investment firm, also ask if they can provide a simple timeline showing when your uncle reported OID income in previous years versus when the actual payments (or lack thereof) occurred. This visual timeline can be really helpful for understanding the "phantom income" concept and also serves as excellent documentation if the IRS ever questions the deduction. I've found that some investment firms are better than others at explaining these complex instruments to clients and their families. If your uncle's current firm isn't being as helpful as you'd like, don't hesitate to ask them to connect you with their tax specialist or someone who deals specifically with these types of debt instruments. It's really encouraging to see how this community came together to help solve what initially seemed like an impossible tax puzzle. The collaborative approach here - from explaining basic concepts to sharing professional tools and services - is exactly what makes these complex tax situations manageable for regular people!

As a newcomer to this community, I just wanted to say how incredibly helpful this entire discussion has been! I'm currently dealing with my grandmother's final tax return and discovered she has a 1099 with contingent payment debt that I had never heard of before. Reading through all the explanations about "phantom income" and interest shortfalls has been like getting a crash course in investment taxation. The fact that she would have been paying taxes on interest she never actually received over the years, and now gets a deduction for the shortfall, finally makes sense after seeing it explained in plain language here. I'm particularly grateful for the practical advice about what specific questions to ask financial advisors and what documentation to request. The suggestions about getting timeline breakdowns and asking for tax specialists at investment firms are things I never would have known to do on my own. It's also reassuring to see that even tax professionals acknowledge how confusing Publications like 1212 can be - I was starting to think I was just not cut out for handling complex tax situations! This thread shows that with the right community support and resources, even the most intimidating tax issues can become manageable. Thank you to everyone who shared their expertise and experiences. This discussion has transformed what seemed like an impossible situation into something I feel confident I can handle properly.