Bad investment deduction?

[kpangelinan]

Client invested in silver and the investor is no where to be found. Can the client take the loss as a deduction and where? Schedule D as a capital loss?

Thanks,

[Edsel]

Language

Angelina, do you mean the investor is nowhere or the broker is nowhere to be found? Also if your question is to make sense, we must assume your client invested in certificates and not in the hard stuff itself, right?

One might be held to be a security and the other held to be a personal asset for capital loss purposes. Registration or certificates might help the hard stuff.

Assuming the latter, you might look and see if some of the Madoff legislation applies.
I believe Congress passed special legislation for Madoff losses. Remember, Madoff had some very wealthy, powerful and influential investors. Congress wouldn't pass anything special for flunkies like us...

[kpangelinan]

Broker is no where to be found!

Angelina, do you mean the investor is nowhere or the broker is nowhere to be found? Also if your question is to make sense, we must assume your client invested in certificates and not in the hard stuff itself, right?

One might be held to be a security and the other held to be a personal asset for capital loss purposes. Registration or certificates might help the hard stuff.

Assuming the latter, you might look and see if some of the Madoff legislation applies.
I believe Congress passed special legislation for Madoff losses. Remember, Madoff had some very wealthy, powerful and influential investors. Congress wouldn't pass anything special for flunkies like us...

Sorry for the confusion....the investor is the client and the broker (like Madoff) is nowhere to be found, ie: disconnected phone numbers, a fake office location, etc.

I'll look into what Congress recently passed....thanks a bunch!

[Gary2]

Look into Pub 547 and Form 4684, for Casualties and Thefts, with the emphasis on the theft aspect.

[DaveO]

If I'm reading between the lines correctly the client bought silver for "safe keeping" through the broker. The broker likely never owned the silver in the first place or if he did only a token amount to show potential investors. At some point the broker folded up his tent and left town with your clients money and however many others.

When I first started investing in precious metals I'd get calls from these guys. You bought the silver but they held it for a safe keeping charge each month. When I told them I only bought through reputable dealers for immediate delivery they always hung up on me.

Gary2 is right file as casualty/theft loss.

[taxmandan]

And, your client needs to gather any information about criminal complaints, investigations, etc. that the authorities have conducted, including news media reports. He did report this to the authorties right? TheIRS will want to see such information should they audit the loss taken.