IRS Releases Guidance on Ponzi Scheme Theft Losses

	The Internal Revenue Service earlier this week issued detailed guidance for investors who have lost money in a Ponzi scheme, such as the one Bernard Madoff recently pleaded guilty to running. In answering 7 questions about theft loss deductions, the IRS made it clear that Ponzi scheme losses are theft losses, not subject to the itemized deduction limits, and that investors can carry such losses back 5 years. The IRS also created a safe harbor to allow investors to avoid potential problems in proving how much money lost was fictitious income versus a return of capital. Read this article that explains how to get this relief on clients’ 2008 tax returns.