The two most critical mistakes that result in the loss of the maximum advantage of Ponzi tax deductions seem to be:
The failure to deduct tax losses in the correct year and entering into settlements that may result in a reduced value of the loss are the two most significant errors that can lead to the loss of maximum advantage of tax deductions. For instance, if a settlement includes shares of stock that subsequently lose all their value, the ordinary theft loss can turn into a capital loss that is of much less value. It is crucial to plan taxes properly to take full advantage of the tax losses while avoiding the pitfalls.
Tax advisors and litigation counsel must collaborate closely to ensure that all available options for Ponzi scheme victims to utilize tax losses are not foreclosed. By working together, professionals can avoid costly mistakes.
In considering the various options of recovery available for tax losses some fundamental knowledge of the law is important.
In REPORT 1 – Richard Lehman covers those fundamentals into the following order:
- The Amount of the Theft Loss Deduction
- The Timing of the Theft Loss Deduction
- Tax Loss Carry Forwards
- Deduction in the Year of Loss
- Deduction in Years Other Than the Year of Loss
- Other Sources of Tax Recovery
- Payments Received as a Return of Capital – Not Income
- “Phantom Income” Tax Treatment
- Tax Planning and the Practical Effects of the Tax Rules – Mistakes to Avoid.
REPORT No. 1: FTX created huge losses for many – similar to Madoff Ponzi scheme
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