Resources for professional advisors and victims of Ponzi scheme losses and Clawbacks of Ponzi Scheme profits and principal on how to maximize their tax refunds from such losses and clawbacks

Ponzi Scheme Theft Loss And NEW Trump Tax Code

There are hundreds of fraudulent investments that crash and burn every year injuring investors from all walks of life. These schemes result from a trade or business and those seeking profitable investments. The losses as a general rule in the schemes are deductible since these investors were seeking profits. Investment losses from these fraudulent schemes are deductible.

This is a business loss and such a loss may be recovered in the form of tax refunds.

1. Identify the techniques available for defrauded investors to recover funds in the form of taxes they will not have to pay for a financial theft loss.
2. Discover the legal methods of maximizing the tax refund offered from both the United States and taxes paid to almost all of the separate states.
3. Recognize the difference between Ponzi Schemes and other types of thefts. 
4. Learn what is the “Safe Harbor” and Ponzi Scheme tax recovery.

More resources re; Form 4684 & Ponzi Scheme Tax Loss

NEW read about the Trump Tax Reform and unusually low tax rates for foreign investors in United States real estate

Because of the new Trump tax law, (“the Trump Tax Bill”) a foreign investor could receive a forty percent (40%) reduction in the U.S. income tax of his or her gains and income from their real estate investments. For those foreign investors who already were invested in U.S. real estate, their after tax returns could now be forty percent more valuable without raising a finger.

Taxes on U.S. real estate income will now be lowered to tax rates of 21% for corporations, both foreign or domestic. With U.S. home inventories low, a world in turmoil and many countries around the world continuing to charge high tax rates, the flow of foreign investment seeking real estate in the U.S., caused by the Trump Tax Bill can only greatly increase the desires of the rest of the world to own a piece of America.

Furthermore, not only has the after tax income of real estate investments gone up for the foreign investor, the investment structure has become more simple.

READ FULL ARTICLE HERE BY RICHARD S. LEHMAN ESQ.

United States Taxation of Foreign Investors PODCASTS

NEW PODCAST: Foreign Investment in U.S. Real Property

PODCAST: Tax Planning and Reporting Challenges, Anticipating Tax Issues When a Foreign Investor or Entity Acquires or Disposes of Interests   

 

This podcast was recorded during a live webinar on November 1, 2016 by Stafford Publishing.

SPEAKERS:

• Ryan Dudley, Partner, Friedman, New York
• Richard S. Lehman, Atty, United States Taxation and Immigration Law, Boca Raton, Fla.
• John R. Strohmeyer, Crady, Jewett & McCulley, Houston

The speakers review these key topics:

1. What are the tax implications of purchasing U.S. real estate individually or through a U.S. LLC vs. a foreign corporation, a U.S. corporation, or a trust?
2. What are the tax reporting obligations for non-U.S. owners of U.S. real estate?
3. What tax pitfalls do professionals need to grasp when handling the tax and compliance issues for foreign investors?
4. What special FIRPTA rules apply to REITs?

A brief analysis of the IRS three separate relief programs, by Richard S. Lehman Esq

1.    The Offshore Voluntary Disclosure Initiative

 Under this program, taxpayers who are found to be willful may submit their name to the IRS in advance of making any disclosures regarding their tax issues.  The IRS will then notify the taxpayer that the taxpayer’s record is clean as far as the IRS is concerned and that the taxpayer is not under examination, nor have any foreign banks reported that the taxpayer has a bank account in that bank.  If the I.R.S. has prior knowledge of the taxpayer’s failure to comply, the taxpayer will not be able to enter this relief program.

Once the taxpayer has received this clearance from the IRS, the taxpayer will then be required to file eight years of amended tax returns, together with eight years of proper reports for the taxpayer’s foreign bank accounts.

The taxpayer will then be required to include in the amended tax returns any and all income not reported from the foreign bank accounts and pay the tax on such income.  This tax will be subject to a 20% accuracy penalty and will, in addition, be charged with interest on unpaid taxes.  The taxpayer will also be required to pay a bank deposit penalty equal to 27 ½% of the highest bank deposit balance over the eight year period.

2.    The Streamlined Program – Nonresident Taxpayers

The Streamlined Program may apply to United States taxpayers who are resident outside of the United States.  United States taxpayers who are tax residents outside of the United States may clear their record for their failure to file foreign bank reports in a much simpler fashion than those who are resident in the U.S.  They must however be  “non-willful” in their failure to file the foreign bank reports.

Non-willful taxpayers who are nonresidents outside of the United States will be permitted to enter into the Streamlined Program for nonresident taxpayers. Pursuant to the Streamlined Program, they will be required only to file three years of tax returns that should be amended to include any and all unreported income and they will be required to file FBAR reports for the prior six years.  There will be no penalty assessed on foreign bank deposits of those United States taxpayers who are residents abroad.

3.    Streamlined Program for Resident Taxpayers

The Streamlined Program is also open for United States taxpayers who are U.S. residents. United States taxpayers who are tax residents within the United States and are “non-willful” may clear their record for their failure to file foreign bank reports.

Non-willful taxpayers who are residents of the United States will be permitted to enter into the Streamlined Program for resident taxpayers.  Pursuant to this Streamline Program, they will be required only to file three years of tax returns that should be amended to include any and all unreported income and they will be required to file FBAR reports for the prior six years.  There will be a five percent penalty assessed on foreign bank deposits of those United States taxpayers. 

Read the full article "The FATCA Team Approach; The Role of Lawyer and Accountant" by Richard S. Lehman, Esq. http://www.lehmantaxlaw.com/?p=1388

Richard S. Lehman answers frequently asked questions on the topic of Ponzi Scheme Theft Loss

Question 1.    Ponzi Scheme victims may be entitled to a theft loss deduction.  What is considered a theft loss?

Answer:    For purposes of theft loss deduction, the term “theft” shall be deemed to include, but shall not necessarily be limited to, larceny, embezzlement, and robbery.  Whether “theft “occurs for federal tax purposes can also depend on the law of the jurisdiction where the loss was sustained.  A taxpayer claiming a theft loss must prove that the loss resulted from a taking of property that was illegal under the law of the jurisdiction in which it occurred, and was done with a criminal intent.  The IRS ruled that, if the perpetrator of the Ponzi scheme violated a state criminal law, the Ponzi scheme losses are theft losses for federal tax purposes because the perpetrator intended to, and did, deprive the investor of money by criminal acts.

 

Question 2: How much can be claimed if there is a Ponzi Scheme Theft loss?

Answer:    The amount of the theft loss that is deductible is calculated as the tax basis of the lost asset reduced by insurance proceeds recoverable and other claims for which there is a reasonable prospect of recovery.

 

Question 3: Can a taxpayer claim a theft loss for income that was reported for tax purposes and not distributed to the victim.

Answer:   A taxpayer will receive basis for taxes paid on “phantom income” that was credited to the investor’s account, whether or not it was paid to that account by the Ponzi scheme.

 

Question 4: Is a theft loss deductible as a capital gains or ordinary income?

Answer:    The investor is entitled to an ordinary loss rather than just a capital loss.  The IRS considered a Ponzi scheme theft loss to be a loss that is incurred in a transaction entered into for profit.

 

Question 5: How many years may a theft loss be carried back from the year the loss is reported?

Answer:   The investment theft loss forms part of the taxpayer’s operating loss that may be carried back or forward under normal net operating loss rules.  Generally these rules provide for a three year loss carryback and 20 year loss carryforward (or “carryover”) limitation.

 

Question 6: When should a theft loss be claimed as a deduction?

Answer:    A theft deduction is allowed for ay theft loss sustained during the taxable year and not compensated by insurance or otherwise.  A theft loss is treated as sustained during the taxable year in which the taxpayer discovers the loss.  However, a theft loss is not deductible in the taxable year in which the theft was discovered to the extent that a claim for reimbursement exists and there is a reasonable prospect of recovery of the loss.  If a theft loss cannot be deducted in the year of discovery because a reasonable prospect of recovery of the loss exists, then it cannot be deducted until the year in which it can be ascertained with reasonable certainty that no reasonable prospect of recovery exists.

 

Questions 7: Is there an IRS procedure that expedites the deduction of theft losses from a Ponzi scheme?

Answer:    Yes.  In 2009, two important documents were issued by the IRS regarding the taxation OF Ponzi schemes.  In Rev. Rul. 2009-9, the IRS clarified much of the previously unsettleld law in this area.  The IRS provided a “safe harbor” that offers thousands of Ponzi scheme victims a badly needed uncomplicated shortcut cash refunds form tax losses.