What Safe Harbor Really Means for Ponzi Victims – IRS Estimates it will Refund Fraud Victims $17 Billion, But Not Without a Fight
Under the NEW IRC Section 165 Safe Harbor Rules the IRS estimates it will refund victims of the Bernard Madoff’s massive ponzi scheme around $17 billion!!
The Safe Harbor provisions are crucial to obtaining relief for victims of investment stock fraud because it converts what would ordinarily be a capital loss (which is offset against capital gains and any unused capital loss is then limited to a deduction of only $3,000 a year indefinitely) into an ordinary loss allowing the victim to offset ordinary income (such as W-2 and self-employment income, as some examples) in the year of discovery.
What Safe Harbor Really Means for Ponzi Victims
Safe Harbor makes it easier for victims to obtain a relief, but they will still need a specialized tax expert to prepare such returns and even more importantly -to represent them when the IRS challenges these returns (and the IRS will!). So when taxpayers are audited after following the safe harbor guidelines, they will need someone knowledgeable, assertive and aggressive in their corner to do battle with the IRS.
Investment gains and losses are always generally considered to be “capital” not “ordinary” which is a word in IRS lingo that describes non-passive income. If presented a choice, one would always chose to have a loss considered “ordinary” vs. “capital” as it can be used to offset ordinary (non-passive) income.
Remember: The IRS is not in the business of giving away money!
I am not surprised that the IRS has gone public with its “safe harbor” procedures for fraud victims. However, I would be surprised if the IRS actually follows through on their statements. I think we will see these returns being audited (challenged) left and right, as the IRS is not in the business of giving away money, as especially to the tune of $17 billion! It is not unusual at all for the IRS to do one thing while stating another. I see it happening every day of the week in my practice.
**For more advice and information on investment fraud representation, visit the Tax Resolution Services web site for a free tax relief consultation or call 866-477-7762.
More Tax Help, IRS News and Tax Relief Tips:
- Tax and Planning Implications for Madoff Ponzi Scheme Victims
- What Everyone on Madoff’s 162-Page Client List Should Know About Recovering Losses through Tax Deductions
- New IRS “Safe Harbor” Guidelines for Ponzi Victims Filing Tax Theft Loss Deductions
- Why the IRS Picks on Small Businesses and How to Avoid Triggering an Audit
- Michael Rozbruch Interviewed in Opportunist Magazine
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March 24th, 2009 at 11:03 am
[...] recently blogged about the new IRS Safe Harbor guidelines for Ponzi scheme [...]
April 27th, 2009 at 12:30 pm
[...] 30-40% of their losses by filing tax theft loss deductions. Even though the IRS has released Safe Harbor Guidelines for recouping their fraud losses,
July 31st, 2009 at 7:26 pm
WHAT IS A PONZI SCHEME?
According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.
http://www.secinfo.com/d14D5a.v6Q98.c.htm