There are several investments that turn out to be fraudulent schemes in which investors invest their hard earned funds and lose those funds because there was never in fact an actual investment that produced profits. Generally, those frauds are known as Ponzi Schemes.There are several investments that turn out to be fraudulent schemes in which investors invest their hard earned funds and lose those funds because there was never in fact an actual investment that produced profits. Generally, those frauds are known as Ponzi Schemes.
Taxpayers who lose money in Ponzi Schemes may enjoy a tax advantage and recoup some of their lost funds by deducting their losses as financial theft losses. Deductions may be used against income that is being earned by the defrauded taxpayer, both before and after the fraud is discovered. There are several important rules that must be followed to enjoy this tax benefit.
Below is a short 7-minute video segment:
Ponzi Scheme Tax Refunds, Use of Losses, Character of Loss, Year of Discovery and other Reductions.
In the event a taxpayer in a Ponzi Scheme is clearly a defrauded individual in a financial fraud and that the perpetrators are indicted for the fraud, the taxpayers can have an expedited procedure to deduct their losses from the taxpayer’s income and obtain tax refunds. This expedited procedure is only available in the event there is an indicted and/or proven criminal undertaking which led to the taxpayer’s losses. This is described in full in the “Safe Harbor Rules”.
Below is a short 4-minute video segment:
The Safe Harbor and The Amount of Loss
Below is a full 1.25-hour educational presentation:
- Ponzi Scheme Tax Loass Presentation slides download as pdf
- IRS Revenue Ruling: download as pdf
- Revenue Procedure: download as pdf
- REPORT NO.1: Bernard Madoff Tax Loss – Introduction download pdf
- REPORT NO.2: A Reasonable Prospect of Recovery download pdf
- REPORT NO.3: Is the Safe Harbor Worth it? download pdf
- TAX MANAGEMENT BNA Real Estate Journal Vol 27, No2, Feb 2011 Ponzi Scheme Tax Losses
- BNA Daily Tax Report; Favorable Tax Consequences Related to Ponzi Schemes and the Clawback September, 2011 Read full article or download pdf
Richard S. Lehman was the creator of the informative BLOG BernardMadoffTaxLoss.com a blog created as a gathering point for tax matters relating to the ponzi scheme tax losses and the Bernie Madoff ponzi scheme case. Since that ponzi scheme, the desire for more basic information on ponzi schemes has been unleashed, and the blog has now become PonziSchemeTaxLoss.com
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