Victims of Ponzi schemes—including those perpetrated by Bernard Madoff and R. Allen Stanford—can claim big deductions on their taxes, the IRA commissioner told lawmakers today. The matter, unclear in the tax code, had been a concern for victims, the New York Times reports. The IRS “is issuing guidance articulating the tax rules that apply and providing ‘safe harbor’ procedures,” Douglas Shulman said.
The losses will be labeled theft losses instead of capital losses, meaning a bigger break for most, Bloomberg adds. Madoff investors who aren’t suing him can deduct 95% of their lost cash and claim the rest later; those who are suing can claim a 75% deduction.