Discussion:Ponzi scheme
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Discussion Forum Index --> Tax Questions --> Ponzi scheme
| 19 June 2006 | |
| I have a client who lost money in a Ponzi scheme. As difficlut as it is to believe the only documentation he has of his "investment" is a cancelled check. He never received any written documentation, receipt, etc... from the person to whom he "gave" the money. Interestingly, he borrowed money to make this "investment."
There are 2 questions: 1) Can I deduct this as an investment loss on Schedule D? (He has investment income to utilize most of the loss in the current year.) 2) Is the interest incurred on the loan obtained to fund his investment tax deductible as investment interest? | |
| 19 June 2006 | |
| Consider deducting this as a theft loss instead of an investment loss. Was a fraud complaint filed in either civil or criminal court? | |
| 19 June 2006 | |
| I agree that it is a theft loss. I had a couple of clients that lost money in the same ponzi scheme a few years ago. One of them asked me about it before they "invested" and I told them that it was a ponzi scheme and they did it anyway. He put in $26,000 that he admits to but I personally think it was more and he's afraid to admit it. The scheme was "guaranteed" to make 10% a month compounded and it was tax-free too!! It amazes me what people want to believe. | |
| 20 June 2006 | |
| Do they ever listen to the CPA?
My guy was getting 5% every 2 weeks. He borrowed money to make the "investment." Thanks for the feedback. No comment on how to treat the interest on the funds he borrowed? | |
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