Using the Tax Code to Recoup Securities Fraud Losses
If you are a victim of financial fraud such as securities fraud, mortgage fraud, “Ponzi” schemes, or other white collar financial crimes you may be eligible to recoup some of your losses using the United States Tax Code.
Specifically, under the Safe Harbor Provision to Section 165 of the Internal Revenue Code, victims who have no reasonable prospect of recovery from financial fraud losses can immediately claim a theft loss deduction equal to 95% of their losses in the year the theft was discovered. Victims who are suing or intending to sue third parties in the scheme can only claim a deduction equal to 75% of their losses as they have some prospect of recovery. Section 165 allows victims of financial crimes to convert their capital losses into ordinary losses, which, in turn, can be used to offset ordinary taxable income from past, present and future tax returns.
The key is that you must act quickly once you discover that they have been victimized by a financial crime – the deduction must be filed in the same taxable year the loss is discovered, regardless of when the loss was actually sustained.
If you believe that you have been the subject of a financial crime please contact the securities fraud attorneys at Fitapelli Kurta immediately.