Discussion:Ponzi scheme creates NOL
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Discussion Forum Index --> Advanced Tax Questions --> Ponzi scheme creates NOL
Discussion Forum Index --> Tax Questions --> Ponzi scheme creates NOL
| 8 October 2009 | |
| I have a taxpayer who was caught in two Ponzi schemes to the tune of $55,000. My question has to do with the NOL that should be created by this loss. I have read that individuals are considered a small business for the NOL provision. Lacerte is not calculating an NOL. It calculates that the Nonbusiness deductions are greater than the Nonbusiness income, which is still greater than the loss on form 1040 line 41.
Is this correct? If so then it doesn't seem that the new ruling 2009-20 really helps individuals. | |
| 8 October 2009 | |
| I understand that for the Madoff the victims were allowed to take a causalty/theft loss. I would think that all types of Ponzi schemes would be treated the same way. | |
Seaside CPA (talk|edits) said: | 8 October 2009 |
| See Revenue Ruling 2009-9. It may help clarify things. | |
| 8 October 2009 | |
| My NOL calculation starts with -34,155 on line 1, excess of nonbusiness deductions over income is 65,385 and then the 2008 NOL calcuation is a positive 31,236. No other numbers on the calculation form.
Yes all Ponzi type victims are allowed to treat this as a theft loss allowing a full (95%) deduction. The goal is to give the victims ability to use this loss to offset their income and create an NOL - that's to be the beauty of it. I have read 2009-9 and don't see where it addresses this - -any help? | |
| 8 October 2009 | |
| I'm trying to come up with an NOL calculation using TaxTools and so far, based on the info you've given, there is no NOL. Have you used either Taxtools or the 1045 Sch A yet? | |
| 8 October 2009 | |
| No I have not. It seemed to me that the IRS announced new allow favorable ordinary loss treatment for investment theft losses calling them taxpayer-friendly. Wouldn't most everyone loss an NOL this way?
This doesn't make sense because most people will have greater expenses than nonbusiness income. | |
Laketahoecpa (talk|edits) said: | 8 October 2009 |
| In my software, you code the theft either personal or business. Also, there is special section to input ponzi scheme losses. Did you code it as business? Does you software have input section for ponzi scheme losses? | |
| 8 October 2009 | |
| Lacerte has the code of 3=income for this. But when I change it to business I get the same thing. Yes I using the Rev Proc 2009-20 Safe Harbor section in the disposition screen. | |
Douglasholbrook (talk|edits) said: | 9 October 2009 |
| How much was their business income, such as their W-2s? If that is more than the $55,000 Ponzi loss, it may well be that they dont have an NOL. They are already getting the Ponzi loss benefit by reducing the other income. | |
| 9 October 2009 | |
| I see no NOL in this situation. Lacerte is telling you that the business deduction of $55,000 is less than the taxpayer's business income. | |
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