Some Madoff victims may be able to deduct most of their losses and carry unused deductions back as far as five years or forward as far as twenty years, according to
this NY Times dispatch:
Under the plan, which has been reviewed by the Congressional offices, the I.R.S. will allow investors who are not suing Mr. Madoff to claim a theft-loss deduction equal to 95 percent of their investments, minus any withdrawals, reinvested gains and payouts from the Securities Investor Protection Corporation, the government-chartered fund set up to help protect investors of failed brokerage firms.
Investors who are suing Mr. Madoff, and who thus may have some prospect of recovery, can claim a deduction equal to 75 percent of their investments.
The I.R.S. is also relaxing the rules on how far back the losses can be carried. Current theft loss rules typically allow loss to be carried back 2 years and forward 20 years, but under the plan, the I.R.S. will allow losses to be carried back 5 years as well as forward 20 years.
Some Madoff victims may be able to deduct most of their losses and carry unused deductions back as far as five years or forward as far as twenty years, according to this NY Times dispatch:
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3 comments:
This is a huge tax break for the rich, because they will be allowed to offset all their ordinary income taxes as well as the taxes on their investments, without dollar limit. Some may be excused from federal income tax for up to a quarter century! I wonder if IRS really has the authority to do this on its own? And how does this fit into the federal budget, it will cost tens of billions of dollars!
No matter who the malefactor or how outrageous the conduct, the bill keeps coming back to the U.S. taxpayer.
Sure sounds like a huge tax break for the (formerly) rich, but I haven't paid attention to the fine print. Much of the lost billions may have consisted of imaginary reinvested gains. In practice, somebody who invested $1 million, saw it grow to $3 million and took out $800,000, may have only $200,000 to deduct. As I say, I haven't pondered the fine print.
This will keep lawyers occupied for years to come.
It's easy to understand refunding taxes on phantom income, those taxes never should have been paid. Does it matter if the gains were taxed at 15%, but the deduction will save 35%?
Those who've been bankrupted by Bernie may not be able to take full advantage of the IRS' gift. But someone who has substantial other income to shelter is really going to be able to put 35% of his losses (or 39.6% in 2011 and later) back on the American taxpayer.
I agree, there will be fine print galore. I may have to go to the Heckerling Estate Planning Institute next year to learn more.
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