The IRS is trying to show its softer side when it comes to all the U.S. taxpayers out there who were swindled in investment schemes in 2008. The government is making it easier for victims of shady financial advisors to get some tax relief from their losses, says John Eliason, a member of the Financial Crisis Recovery Team at Gardere Wynne Sewell. Under the IRS's safe harbor, losses from Ponzi schemes are considered theft losses, even if the culprit has not been convicted. Provided certain requirements are met, the IRS allows defrauded investors to deduct up to 95 percent of a loss, minus any recovered funds. "The IRS has always made it clear that these are considered ‘theft' losses," Eliason says.
"However, the new guidance provides an optional safe harbor allowing certain investors to report the loss without having to determine the full amount or the prospects of recovering these losses." To interview Mr. Eliason, contact Rhonda Reddick at 800-559-4534 or rhonda@androvett.com.