It’s Not Your Fault FTX & Alameda ‘Research’ STOLE YOUR MONEY!
The information below is intended to educate the FTX victim of needed tax planning & proper implementation of FTX tax losses, for maximum benefits, now and into the future.
— Richard S. Lehman, U.S. Tax Attorney
If You Lost Money:
The FTX fraud was a Ponzi scheme and losses from Ponzi schemes are acknowledged by the I.R.S to be “theft losses”. They are deductible from a taxpayer’s ordinary income.
Everyone that paid taxes on nonexistent profits will recoup those taxes from the I.R.S.
Reports 1-3 below will explain in detail.
If You Made Money:
If you are in the process of paying back your profits – the law is structured where you can get a tax refund. The amount depends on your tax bracket.
THE CLAWBACK is well thought out and brings more fairness to those who have lost money.
IRS Documents:
- I.R.S. Revenue Ruling 2009-9 describes the proper income tax treatment for losses resulting from “Ponzi Schemes”:
Download this document here. - I.R.S. Revenue Procedure 2009-20 provides the procedures for a simplified, unified way of dealing with “Ponzi Schemes” and their investors:
Download this document here.
For Those Who Lost Money
A series of reports focusing on the tax benefits available as a result of the FTX fraud. These Reports are not intended to be and can not serve as legal advice to any reader.
REPORT 1:
FTX Tax Losses
Each taxpayer has their own unique factual situation which is going to need to be reviewed by tax advisors and litigation counsel before any legal conclusions can be reached. The Reports are being made in a series form since there is still a great deal of facts to be uncovered in the FTX fraud. These facts are going to be extremely important in coming to conclusions about tax positions.
Furthermore, there could be guidance from the I.R.S. in this particular situation or any number of other factors that require the subject matter to be updated on a continual basis. The FTX fraud has resulted in much pain throughout the world. Hopefully some of this can be eased in the form of tax relief from either the U.S. or other countries whose citizens are entitled to permit their financial losses to be deducted from their taxes. Read REPORT No.1 online here.
REPORT 2:
A Reasonable Prospect Of Recovery
There is no set of fixed rules that clearly define the taxpayer’s reasonable prospect of a recovery, that will result in a limitation of a taxpayer’s theft loss deduction in the year of discovery. However, it is possible to have a grasp of the concept by reviewing court statements defining the concept. We will also look at general principles that have emerged from the court cases and review two cases that could be said to represent the extreme ends of the spectrum of just what is a reasonable prospect of recovery. Read REPORT No. 2 online here.
REPORT 3:
The Safe Harbor
In 2009, two important documents were issued by the IRS regarding the taxation of Ponzi schemes. In the Rev. Rul. 2009-9, the IRS clarified much of the previously unsettled law in this area. The Rev. Proc. 2009-20 applies to losses for which the discovery year is a taxable year beginning after December 31, 2007; it offers thousands of Ponzi scheme victims a badly needed uncomplicated shortcut to cash refunds from tax losses. These two IRS documents form a good package and were drafted in record time, for any government agency.
However, it is important to remember that the IRS is not in business to give back money. The “safe harbor” needs to be studied carefully, because it could be extremely expensive form a tax standpoint. It might be a safe harbor, but the tax cost to dock your boat in this harbor could be very high. Read REPORT No. 3 online here.
Tax Refunds From Ponzi Scheme Losses: Tax planning for the most part will provide the taxpayer with the appropriate projections of the use of the tax losses under differing circumstances. Watch this educational presentation.
For Those Who Made Money
Favorable Tax Consequences Related to Ponzi Scheme and the Clawback,
BNA article 9-19-11, download as a PDF
The Ponzi Clawback And The Value Of The Mitigation Procedure
Individuals who have made money from the scheme those profits are to be returned to the appointment trustee for distribution to the losing party. When this clawback occurs, generally the income clawed back from the taxpayer will be deductible by the taxpayer in the year it is paid. However, often the deduction in the year the clawback is paid may occur at a much lower tax bracket than the tax bracket that was applicable to the income when it was included in income. For maximum tax recovery, watch this educational presentation.