|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Madoff’s Victims May Recover Losses Through Tax Code
Ryan J. Donmoyer
Bloomberg. December 18, 2008
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EXCERPT: Individual investors who lost money in Bernard Madoff’s alleged $50 billion fraud may be able to recover some of their money by seeking U.S. tax refunds.
“The Madoff debacle will result in what amounts to another federal government bailout,” said Warren Kessler, an attorney at the Los Angeles law firm Kessler & Kessler. “It is likely that the Treasury will wind up refunding taxes,” at least on the loss of money individuals invested with Madoff, he said. Capital-gains taxes paid by investors may be refundable for 2005 through 2007, lawyers said. In addition, they said investors probably can convince the Internal Revenue Service they are victims of theft, which would let them deduct losses from their income taxes dating back to 2005. Any unused theft losses could be used to reduce tax liabilities for the next 20 years. […] John Barrie, a tax partner at the New York law firm Bryan Cave LLP, said investors will want to claim a theft loss rather than an investment loss. A theft loss can be used to reduce ordinary income, while an investment loss can only offset capital gains, which most people don’t have this year, he said. To claim the more valuable deduction, Barrie said, the taxpayer must establish that a theft occurred, a threshold he said will likely be met by Madoff’s indictment. Taxpayers must also establish there is no likelihood of recovering the money, which he said they probably can do unless they get compensation from the government-sponsored Securities Investor Protection Corp. Only individuals who invested directly with Madoff can deduct theft losses, Barrie said. Those who invested indirectly through a hedge fund or other entity must wait for the fund to report the theft loss on tax forms before they can claim any benefit. |
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