If you suffered a loss on deposits you had with an insolvent financial institution, or in a ponzi-type investment scheme, all may not be totally lost.
You may be able to claim a deduction for losses on deposits in insolvent financial institutions, and the IRS affords you a number of choices of how to deduct these losses:
• You can treat the loss as a non-business bad debt, and deduct it as a short-term capital loss on Schedule D.
• You can deduct the loss as a casualty loss on Schedule A.
• You can deduct the loss as an ordinary loss under the “miscellaneous deductions subject to a 2% limit” section of Schedule A. Read more