Rev Proc 2009-20 PONZI losses.

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  • dyne
    Senior Member
    • Jul 2005
    • 764

    #1

    Rev Proc 2009-20 PONZI losses.

    In again reading this Revenue Procedure, it occurs to me WHERE is this deduction
    claimed?. Normally a non-business bad debt is considered to be a short-term capital loss
    limited to a deduction of 3,000 per year if there are no capital gains. Is that where this
    must be claimed? If so, this will spread the loss out over many years and many such
    investors will not live long enough to recover their entire loss deduction. The Rev Proc
    is NOT clear to me in this regard. Comments?
  • AJsTax
    Senior Member
    • Jun 2008
    • 629

    #2
    sch a

    not subject to 2%
    AJ, EA

    Comment

    • dyne
      Senior Member
      • Jul 2005
      • 764

      #3
      AJ'sTax. That seems logical. Where did you find that?

      Comment

      • AJsTax
        Senior Member
        • Jun 2008
        • 629

        #4
        Rev. Proc. 2009-20

        on form 4684, Casualty loss, carry to Sch A
        no 10% hit,
        no $100 deduction.
        AJ, EA

        Comment

        • dyne
          Senior Member
          • Jul 2005
          • 764

          #5
          Thank you So much!

          Comment

          • Possi
            Senior Member
            • Mar 2006
            • 1432

            #6
            When the dust settles...

            I'll be using that one, too. Printed the reference to study after rush..

            thanks eversomuch!
            "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

            Comment

            • dyne
              Senior Member
              • Jul 2005
              • 764

              #7
              After considering the issue, it occured to me that a typical taxpayer may have a loss from a PONZI type investment deduction which is greater than his income for the year in which the loss is claimed. Would that create a NOL which could be carried back or perhaps forward? Initial research indicates that a ponzi loss is treated as being a business loss (even though it is NOT) and accordingly a NOL CARRYBACK can be claimed or the taxpayer can elect instead to carry it forward for up to 20 years. This is interesting since IF the taxpayers does NOT elect the special treatment allowed by the Revenue Procedure, then the loss is considered to be a short-term capital loss ONLY when it is completely worthless and a loss deduction is only allowable up to $3,000 per year, unless it is netted against other capital gains; and the balance carried forward for an indefinite period of years. Does anyone know anymore about this issue?
              Last edited by dyne; 04-16-2010, 02:46 AM. Reason: typo

              Comment

              • AJsTax
                Senior Member
                • Jun 2008
                • 629

                #8
                Yes, NOL

                There is another Proc. in the same series that addresses that issue. It is a business NOL to carry back or elect to carry forward.
                AJ, EA

                Comment

                • dyne
                  Senior Member
                  • Jul 2005
                  • 764

                  #9
                  Revenue Ruling 2009-9 and IRS Internal Revenue Bulletin 2009-14 provide authority
                  for claiming a PONZI type qualifying loss as a casualty loss instead of as a capital loss.
                  Last edited by dyne; 04-19-2010, 03:29 PM. Reason: typo

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