Is there a tax break for Ponzi scheme victims?

The IRS has released new guidelines concerning Ponzi schemes, which are more favorable to victims than prior options. Generally speaking, the IRS states that Ponzi scheme victims who aren’t suing to recover their losses may be able to deduct up to 95% of qualified losses in the year the fraud is discovered. The new IRS rules outline that victims would not be subject to limits that apply to personal casualty or theft losses, and they may be able to carry back net operating losses for five years to offset taxes paid, or forward 20 years.

The changes do leave a number of questions open, such as:

  • Are there guidelines for people who invested in Ponzi schemes through nontaxable accounts, such as IRAs?
  • How do individuals who invest in Ponzi schemes indirectly, such as through “feeder funds,” go about getting relief under the new tax changes?

If you suspect that you may have been the victim of investment fraud, you may be able to recover your losses. For more information, contact an investment fraud attorney at Meyer Wilson by calling or filling out our online form. Our experienced stock broker arbitration attorneys are licensed in Ohio, California, and Michigan, and we represent investors nationwide in securities arbitration and litigation claims.

If you need information regarding the aftermath of a Ponzi scheme, you can read Attorney David Meyer’s post for the American Bar Association by clicking here.