Ponzi

[BOB W]

Client called this morning and had $15,000 invested with a different ponzi scheme (not Madoff). "told she could write off 70% on a news broadcast"???

Anyway, IS this a theft or an investment loss? A theft would be subject to 10% + $100 deductible. An investment loss would be limited to $3,000 per year but ultimately the whole amount of the loss would be deductible. My client makes over $100,000 so a theft loss would be a small deduction.

My client thought it was an investment, does that count?

[Nashville]

Registered Securities

Client called this morning and had $15,000 invested with a different ponzi sceme (not Madoff). "told she could write off 70% on a news broadcast"???

Anyway, IS this a theft or an investment loss? A theft would be subject to 10% + $100 deductible. An investment loss would be limited to $3,000 per year but ultimately for the whole amount of the loss would be deductible. My client makes over $100,000 so a theft loss would be a small deduction.

My client thought it was an investment, does that count?

Bob I think this may hinge on how "legitimate" the investment was. Madoff had financial products whose base was registered securities, even though the upline was fraudulent. I believe his investors may deduct a capital loss instead of a theft. Homegrown chain letters and the old "airplane" scheme would be more in the "theft" category.

This is my opinion. I wonder if there are citations or more virulent support for either position.

[BOB W]

Her investment was with a broker who invested in stocks as a base, like Madoff. I still have to dig into how much she rec'd as income from her investment with this "ponzi" to determine her real loss.

I'm waiting to see if she will get any 1099 from this guy.