Just finished an interview with my client that I knew was caught in a Ponzi.I have only done one NOL even though I have been a tax preparer for over 20 years. It looks like I will be able to claim all the refunds as a result of the loss taken on a 4684 in less than going back 5 years. Client is single and a high income TP. Can I just start at the earliest preceeding year, or must I start with year 2004? The loss is confirmed in 2009;the return is on extension. refund is estimated at $70,000.Your feed back is appreciated. Thanks Bob
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1-12 & 1-16
See pages 1-12 and 1-16. The two-year carryback is still the default, but 2008 and 2008 offered the election to go back 3, 4, or 5 years, see pages 1-16 & 17. -
Ponzi For Sure
Thanks Lion. I have not started on the return. Still working on the files with the client. Original investment in 2003 paid interest at the rate of 38% for the first 9 months.Investments were always for 9 month terms with interest amount commited to at the beginning of the term by Waterford Funding "Google it very interesting"
It appears that the loss will be in excess of $300,000; nice refund based upon average of 28% tax rate or $84,000. This does not include the state of California " and they thought they had budget problems"If it were me I would rather have my $300,000 than the refunds. How about you? Have a good one everyone.Comment
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Investment Fraud
See Rev. Proc. 2009-20 (Apr. 6, 2009) for a safe harbor for theft loss from Ponzi schemes and Rev. Rul 2009-9 (same date) for info on theft loss from investment fraud. The amount of an investment theft loss includes the fictitious investment gains and income reported in gross income in years prior to the year of discovery of the theft loss (if not distributed to the investor).Comment
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