IRS Rulings May Ease Pain for Many Madoff Victims

irsRecent ruling by the Internal Revenue Service may take away at least some of the sting felt by victims of Bernard Madoff. The Wall Street Journal reports that in March, the IRS ruled that Ponzi scheme victims could “generally deduct nearly all of their qualified losses, including any ‘phantom income,’ in the year the fraud was discovered.” This was a departure from past IRS rules requiring victims to wait years to deduct their losses, and then only their principal.

In addition, the WSJ reports, recently issued rules allow Madoff victims with taxable accounts to

recover taxes paid in prior years by “carrying back” qualified losses for five years and applying any remaining losses against income going forward for as much as 20 years. Under prior rules, many investors had to subtract $100 and 10% of their adjusted gross income from their loss deductions, and could carry back losses only three years or forward 20 years.

Robert Willens, a New York tax adviser, told the WSJ that as a result, Madoff victims with tax offsets “could recover a good 40% of your losses.”

Read the WSJ article

1 Comment

  • Ronnie Sue Ambrosino
    Posted December 10, 2009, 12:46 pm 12:46 pm 0Likes

    Mr. Willens,

    Can you please explain where you got your figure that Madoff victims “Could recover a good 40% of your losses”.

    As the coordinator of the Madoff Coalition for Investor Protection, I have not heard such high percentage recovers from the victims.

    It would greatly help many innocent investors if you were able to explain the 40% recovery to them.

    Thank you,
    Ronnie Sue Ambrosino
    Madoff Coalition for Investor Protection

Comments are closed.