In your scenario, if I understand it right, you start with $100k. It goes up 300% in one year, you end up with a $400k value. You'd have a $300k capital gain, so you'd pay 36% of that in tax, right? You sell $108k of the security to cover the taxes (I guess you could pay this out of pocket and then the security crashes in value, is this your scenario?) so you are left with $298k. The security in the next year then crashes to 20% of its original value, or $58,400. You also now have $233k in loss carry-forwards that never expire.
If you paid the taxes out of pocket and did not sell the security, you could end up negative, although you do have a huge tax benefit waiting for you on future gains to offset it. It really depends on how those loss-carryforwards are applied.
Man. Thinking this through, investing and actually getting gains comes with huge risks because you need to sell to lock in your gains or you risk paying tax on a gain you never actually had. It's just counter-productive, it's going to guarantee nobody actually invests there because the stories of people getting turbo-fucked like in your scenario WILL happen, and people WILL spread it far and wide.
