Ponzi Scheme "Discovery Year"

[Uncle Sam]

Rev Proc 2009-20 rules are only available for eligible losses for which the discovery year is a tax year that begins after December 31, 2007.

Client invested in a partnership years ago.
In 2006 a suit was initiated by the partnership against a firm the partnership contracted with to provide services. In 2008 the Judge signed the memorandum opinion acknowledging the fraud of the entity the partnership contracted with.

Is the tax year of "discovery" 2006, or 2008?

[snowshine]

It doesn't sound like your client has any ponzi claim at all -- I would think the partnership would have to bring that claim and pass it through to the partners. Besides, services are different from investments. Without more info I would be a bit leery of claims here.

Now to get back to your question I have a client who initiated a lawsuit in 2006 and won it in 2008 -- and of course, collected less than a penny on the dollar because, duh, it was a ponzi scheme. The IRS ruled that he does not qualify for the current rule, but they were willing to tell us that if he took it to court he had a good chance of success. As he is 91 and has terminal cancer, we won't be doing that, but somebody should.

[Uncle Sam]

Discovery Year

The investment partnership contracted with an environmental company to provide environmental services (similar to working interests in oil/gas). Environmental company never performed and misrepresented its achievements and credibility to the partnership to solicit funds.

[ChEAr$]

The investment partnership contracted with an environmental company to provide environmental services (similar to working interests in oil/gas). Environmental company never performed and misrepresented its achievements and credibility to the partnership to solicit funds.

Still doesn't sound like any Ponzi scheme to me. You didn't say anything about whether or not the partnership is still in business or what happened to it.
Your client(s) is/are partner(s) in it?

[SFBOB]

Capital Loss or Theft " That Is The Question

The key is for your client to determine the facts and circumstance's regarding the investment and the possibility of fraud.Ponzi is the use of other investors money to payout benefits, and not payouts from profits. The issuance of fraudulant 1099 DIV or 1099 INT forms the are taxable to your client and a deduction to the partnership could constitute fraurd.
If you are going to complete this one; I would get a retainer and advise your client that he may also need the services of an attorney. You should charge your hourly rate. The key to this is, how much of a loss is envolved, and what will the tax saving be for your client, before he spends a bundle on his tax prep.