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Tax Lawyer > Blog > Domestic Tax Planning > The Clawback is a Very Unique Tax Refund for Ponzi Scheme Victims

The Clawback is a Very Unique Tax Refund for Ponzi Scheme Victims

Ponzi Scheme Theft Losses And The Repayment Of Profits By Those Who Prospered (The “Clawback”)

Investors in Ponzi Schemes that profit from those schemes are often called upon to return those profits after the Ponzi Scheme has collapsed, leaving certain investors who…

(1) have profited from the Ponzi Scheme; and

(2) those who have lost money in the Ponzi Schemes.

A trustee in bankruptcy is typically appointed, and the trustee can force the return of profits made by investors from the Ponzi Scheme.

These are “known as a Clawback”. Profitable investors may also be called upon to return both their “profits and or their principal investments” that were returned to them.

There is a unique section of the Internal Revenue Code that permits investors who are forced to make a pay back of profits, to be able to go back in time (even after the Statute of Limitations has run) and obtain refunds from closed years that may be much more valuable than a simple theft loss deduction. Often refunds from the past are more than likely to have been taxed in much higher tax brackets. These refunds of past profits often provide much higher returns than a simple current deduction.

It is important for Ponzi Scheme victims to have a tax lawyer that can;

  • Explore the tax code section that allows taxpayers to recover tax refunds from taxable years that are normally not available under typical circumstances.
  • Identify the requirements of taking advantage of a little known tax code section.
  • Discover the procedures that investors who made money in fraudulent investment schemes must face years after the investment has crashed.
  • Recognize that there are alternative methods of recovery of taxes paid from a Clawback.
  • Learn that the Internal Revenue Code can lead to fairness at times.

Click here for additional ponzi scheme clawback resources.

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