Scam of the day – April 19, 2012 – Tax relief for Ponzi scheme victims

It is bad enough when you lose money to a Ponzi schemer such as Bernie Madoff who never invests the money, but merely uses the funds of new investors to pay off earlier investors until, inevitably, the house of cards falls and everyone loses.  But to make things worse, in the past the IRS did not offer much in the way of tax relief to victims.  Now in a private letter ruling the IRS has just indicated that even though the funds invested by the victims were not directly invested in an actual investment, the losses that the victims incurred are deductible as theft losses.  They are classified as miscellaneous itemized deductions on Schedule A and are not reduced by the $100 offset or the 2% of AGI limitation

TIP

If you lost money to a Ponzi scam, contact your accountant about filing a revised return to take advantage of this new tax ruling.