Romance scam

[JenMO]

Any anyone have a client that got caught up in this? Is the money they sent deductible as a personal loss on sch a? What has to be documented?

[Koss]

Scam

When you say Schedule A, I think you're referring to Form 4684, which flows to Schedule A...

A police report and a paper or electronic trail of the communications would help prove that it was a theft loss, i.e., that the intent of the other person was fraudulent and malicious from the start.

What was it? Did they wire money to a mail-order bride in another country or something?

BMK

[S T]

Article in today paper NC, about some of the scams - that are hitting the "referenced senior group" one of the scams was these people that target a person, romance, and then obtain money! Usually online.

Article referenced "Facebook" but I am sure there are other Social Media Groups as well.

Sandy

[JenMO]

He told me he wired money for his aunt to Nigeria for a date/mate whatever. the wire's show who to and where. I don't believe they filed a police report.

[taxea]

Listen to Koss...a police report should be filed before any loss is taken. This is a criminal act. In order to file a theft or loss one has to show that attempts were made to recover the loss.

[JenMO]

If they file a police report, is the loss taken in that year. Money was sent in 2013, can loss then be taken in 2014

[Koss]

Theft Loss

They can take the loss in the year in which they determine that they have no reasonable expectation of recovering any of the money.

They may well be able to take the loss in 2013.

But in an audit, if they don't file the police report until 2014, the IRS might challenge it, by asserting that because they did not report it to law enforcement during 2013, that they did not know whether any of the money could be recovered.

It's a judgment call. A police report filed in 2014 does provide some support for taking a deduction in 2013. It also provides support for taking a deduction in 2014.

It just would have been better if they had filed the report as soon as they became aware that it was a scam.

If you wire money to Nigeria, it's gone. Scams of this type originating in Nigeria are well documented. The authorities in Nigeria will not be able to recover the money.

I would probably advise the client to file the report, and take the deduction in 2013. They never had any reasonable expectation of recovering the money.

If the IRS challenges it, they have a paper trail that shows when they actually wired the money. In the event of an audit, they could get an affidavit from a detective--a police detective, or a private detective who specializes in financial crimes--that would explain that these kinds of wire transfers are impossible to trace and recover, and that the loss was complete and final within 24 hours after they wired the money.

BMK

[DaveO]

Wait!

You mean that Russian super model isn't really going to come see me once I send her $500 for a visa?

[Burke]

No, but if you send it to me, I will arrange for one to visit you.