Madoff’s Victims May Get Tax Break
December 16, 2008
Investors who became victims of Bernard L. Madoff’s now infamous $50 million Ponzi scheme may get some relief through the tax code. The IRS allows taxpayers to deduct theft losses, as long as they exceed 10% of adjusted gross income. But as the New York Times points out, in order to claim the deduction it has to be reasonably clear that an investor will not recoup his or her losses, which can take a while to prove. For example, it is possible that some of the missing funds are sitting in a bank account and could be seized and returned to investors. The theft requirements would also limit investors’ ability to seek reimbursement by means of a lawsuit.