Responding to all the high-profile Ponzi schemes, particularly the Madoff heist, the IRS is easing rules for fraud victims, making it easier to claim losses on taxes, Investment News reports.
The timing of the rule changes, which lets defrauded investors claim investment fraud losses stretching back five years rather than two, is important because Oct. 15 — the tax filing deadline for those who filed for an automatic six-month extension — is only weeks away.
David Earley, tax senior manager for New York-based Deloitte LLP, explains the benefits for fraud victims:
Under the IRS’ revised rules, investors defrauded in any Ponzi scheme after Jan. 1, 2008, can declare their net operating loss from the investment a “theft loss,” which may be carried back five years instead of two, which was the case under the old rule. That is important, Mr. Earley said, because a theft loss is considered an ordinary loss that allows taxpayers to offset other types of income fully.
“It’s a very beneficial loss,” he said. “If you have to take a loss, that’s the kind of loss you want to have.”
“Beneficial loss” has the hollow ring of “moral victory” to it. But it must be better than an “unbeneficial loss” or “immoral defeat.”
IRS rules for victims of fraud in focus as deadline looms [Investment News]