Anyone been scammed by a Ponzi Scheme or Pyramid Scheme?

The United States Internal Revenue Service and Treasury Department have finally brought some form of financial relief to people who have been scammed by Ponzi-Type Schemes.

If you or someone you know have been scammed, consult a tax accountant to see if you qualify for the tax relief.

Following is an excerpt from the IRS Site explaining how the tax relief works…

• The investor is entitled to a theft loss, which is not a capital loss.  In other words, a theft loss from a Ponzi-type investment scheme is not subject to the normal limits on losses from investments, which typically limit the loss deduction to $3,000 per year when it exceeds capital gains from investments.
• The revenue ruling clarifies that “investment” theft losses are not subject to limitations that are applicable to “personal” casualty and theft losses.  The loss is deductible as an itemized deduction, but is not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions.
• The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery.  Determining the year of discovery and applying the “reasonable prospect of recovery” test to any particular theft is highly fact-intensive and can be the source of controversy. The revenue procedure accompanying this revenue ruling provides a safe-harbor approach that the IRS will accept for reporting Ponzi-type theft losses.
• The amount of the theft loss includes the investor’s unrecovered investment – including income as reported in past years. The ruling concludes that the investor generally can claim a theft loss deduction not only for the net amount invested, but also for the so-called “fictitious income” that the promoter of the scheme credited to the investor’s account and on which the investor reported as income on his or her tax returns for years prior to discovery of the theft.
  Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years. The revenue ruling does not address this argument, and the safe-harbor revenue procedure is conditioned on taxpayers not amending prior year returns.
• A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years. 

This is great news for those of us in legitimate Network Marketing companies.

The government is standing up for the consumer, or distributor, and beginning to make it clear that fraud in this industry will not be tolerated.