Theft loss

[Kram BergGold]

Let's review

So in 2008 the year of the loss we will clain a theft loss of some amount and defer some due to expected recovery. Then in 2012 when it becomes clear what the recovery is we will either file an addiitonal claim if less was recovered than we anticipated or report some income if mroe than anticipated was received. Now her eis the $60,000 quesiton, in 2012 how do I prepare the return so my client is not subject to a second $100 floor and 10% deductible on formn 4684?

[joanmcq]

The thing with Madoff is no one really knows who lost what and whether anything was invested or not and what can be recovered. He was just caught mailing assets to family. You know he has assets; just not how much or what. So it could be awhile before anyone has any idea what they've lost. If through a pass-through, is there not a chance of suing the broker that did not do due diligence in investing with Madoff?

[veritas]

Kram

Has your client filed a claim with SIPC?

"The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash. From the time Congress created it in 1970 through December 2007, SIPC has advanced $507 million in order to make possible the recovery of $15.7 billion in assets for an estimated 626,000 investors."

http://www.sipc.org/media/release05Jan09.cfm

[taxea]

I was taught that in order to be "determined that is is a total loss" you have to wait for the letter from the company before you can report it. That is the year you would take the loss.

Until the Madoff issue or any similar is totally resolved by the courts, I'm of the impression that the loss cannot be claimed. In the Madoff issue and the fact that they are asking for members to return any gain it appears to me that the "victims" in some respect are being looked at as "involved parties" to the scheme. taxea

[joanmcq]

I agree with taxea. It'll be awhile before anyone can figure out what they can claim and how. And from what I understand there were different kinds of accounts with Madoff, some which would have been covered by SIPC (the supposed brokerage accounts), and some which would not be (the 'fund of funds').

[S T]

Ponzi Scheme and Tax Loss

I just found this this info, so it might be worth reading http://www.irstaxattorney.com/blog/2...rsuant-to.html

Sandy

[David1980]

I just found this this info, so it might be worth reading http://www.irstaxattorney.com/blog/2...rsuant-to.html

Sandy

That doesn't look like good news for the taxpayer.

[Zee]

Tax Prophet Article on this issue

I received an email article from the Tax Prophet on this issue in case anyone is interested, here's a link:

http://www.taxprophet.com/newsletters/0812nl.html

[JohnH]

I heard someone on the radio being interviewed about the fact that he had invested all he owned with Madoff. The interviewer asked the usual questions, including whether he ever thought it was unwise to have all his money in one place.

His response:
1) Well, I wanted to keep things simple.
2) The returns were too good to move it somewhere that paid me less
3) The SEC should have been paying more attention to Madoff - they didn't do their job
4) My accountant said I should put my money where I got the best return.
5) I have nobody to blame but myself.

Translation:
1) I was smart enough to accumulate the money, but too lazy to pay attention to what happened with it.
2) I was too greedy to ask any questions as long as I got my 10-12%
3) We Madoff investors need some of the bailout money
4) My lawyer says I might be able to get some money from my accountant's E&OI provider.
5) I'm blaming anybody I can - somebody's got to correct my dumb mistakes.