Rev Proc 2009-20 PONZI losses.

[dyne]

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]

sch a

not subject to 2%

[dyne]

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

[AJsTax]

Rev. Proc. 2009-20

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

[dyne]

Thank you So much!

[Possi]

When the dust settles...

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

thanks eversomuch!

[dyne]

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?

[AJsTax]

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.

[dyne]

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.