Ponzi Schemes And The Safe Harbor

Ponzi Scheme Segment

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.

The Safe Harbor Segment

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”.

Posted in Ponzi Scheme, Clawback, Refund of Losses