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Tag Archive for Ponzi Scheme

The Clawback: Receiving A Proper Refund

Very often there may be a Ponzi Scheme financial theft, in which certain taxpayers have profited since they made early investments and were paid unusual profits that did not exist. Often taxpayers in Ponzi Schemes that have benefited from the financial loss of others are called upon by a trustee to forfeit the profits made in the Ponzi Scheme. Read more

Avoid Ponzi Schemes With This Professional Inside Scoop

There are several investments that turn out to be fraudulent schemes in which investors invest their hard earned funds and lose those funds because there was never in fact an actual investment that produced profits. Generally, those frauds are known as Ponzi Schemes.

Taxpayers who lose money in Ponzi Schemes may enjoy a tax advantage and recoup some of their lost funds by deducting their losses as financial theft losses. Deductions may be used against income that is being earned by the defrauded taxpayer, both before and after the fraud is discovered. There are several important rules that must be followed to enjoy this tax benefit.

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Federal Trade Commission v. Andersons (Ponzi Scheme)

Hale Stewart

High net worth individuals are loathe to transfer assets to any entity over which they have no control. This fact creates an unresolvable problem when forming an offshore asset protection trust: so long as a U.S. person can exert even a modicum of control over a foreign entity, a U.S. court has sufficient grounds to rule that a U.S. based debtor can repatriate assets. More importantly, failure to comply with a repatriation order could lead to contempt citation against the U.S. debtor. The facts of Federal Trade Commission v. Affordable Media[1] typify this problem. Read more

Federal Court Orders Nearly $17.5 Million In Sanctions Against Florida Resident

William Byrnes

The U.S. Commodity Futures Trading Commission (CFTC) announced that the U.S. District Court for the Middle District of Florida entered a final Judgment on June 28, 2016. Defendants Dorian Garcia and his companies, DG Wealth Management (DG Wealth), Macroquantum Capital LLC,UKUSA Currency Fund, and DG Wealth’s successor, Quanttra LP, all of Naples, Florida, are jointly ordered to pay restitution totaling $5,051,052 to defrauded investors victimized in a Ponzi scheme they operated from 2010 to 2015. The Judgment also requires the Defendants jointly to pay a $7.5 million civil monetary penalty and to disgorge $4,948,571 in ill-gotten gains.

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Can You Claim Losses on Deposits Held In Insolvent Financial Institutions And Ponzi-Type Investments?

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

Beware of Clawbacks

Your 501(c)(3) organization or church is in the midst of a large building campaign. Someone approaches you about making a large gift to the campaign. You don’t know the person, but he says that his grandparents were long-time members and supporters of your organization and he would like to honor them with a donation in their names. Sound too good to be true? Well, rein in your enthusiasm. That may just be the case. Before accepting any large gift, particularly one from someone you don’t know, you should exercise some due diligence.

Fraudulent Transfer may Result in a Clawback

A gift that is given to an organization or to individuals may be required to be returned if it can be shown that the transfer to your organization could be termed a fraudulent transfer Read more

Ponzi Scheme Tax Recovery And The Importance Of “Timing” When Claiming Tax Losses

Since the timing of the theft loss deduction is critical to the real economics of the recovery, this phrase is all important. Therefore, before considering tax planning opportunities, on must study the phrase “a reasonable prospect of recovery” in more depth.

The phrase finds its origin in the early internal revenue codes that permitted a theft loss deduction for losses sustained in a taxable year but did not define the word sustained. Therefore, prior to 1954 the law was unsettled as to when a loss was sustained. This caused taxpayers to often lose their tax deduction for a theft loss when the statute of limitations had run on prior years; and it was later found that a loss had been sustained in one of those prior years that was no longer open for change. Read more

Casualties And Thefts; How To Recover Some of Your Losses – Part VI

Substantiation and Reconstruction of Records –

We all know that in an exam situation the IRS is all about records. In the case of a casualty or disaster the rules are relaxed slightly. The IRS is aware that in most cases when a major casualty occurs there is a good chance that the records you would normally use for substantiation are victim of the casualty. The IRS has several great resources out there to help in this event including Publications 584, 584B, and 2194 as well as a Disaster Assistance Hotline (1-866-562-5227).

Of course, the best records are a listing and pictures or videos of your property kept off site and updated regularly. And some clients, especially those that have been through this or Read more

Casualties And Thefts; How To Recover Some of Your Losses – Part V

Ponzi Schemes –

The United States Securities and Exchange Commission (SEC) defines a “Ponzi Scheme” as follows:

The schemes are named after Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. At a time when the annual interest rate for bank accounts was five percent, Ponzi promised investors that he could provide a 50% return in just 90 days. Ponzi initially bought a small number of international mail coupons in support of his scheme, but quickly switched to using incoming funds from new investors to pay purported returns to earlier investors. Read more

Casualties And Thefts; How To Recover Some of Your Losses – Part IV

Calculation of Casualty/Theft Gains or Losses –

Once you have determined that you have an actual casualty or theft you must calculate the taxable effect of the event. These calculations are done on Form 4684 in Section A for personal use property, Section B for business/investment use property and Section C for Ponzi Scheme losses. It is possible to have a taxable gain on a casualty or theft. There are several pieces of information you will need to make these calculations regardless of the type of property.

1. Description of the property (type, location and acquisition date).
2. The type of event (casualty fire, hurricane, theft, etc.) Read more

Casualties And Thefts; How To Recover Some of Your Losses – Part II

What is Not a Casualty/Theft –

Things that do not by their nature qualify as a casualty generally do not satisfy the “sudden, unexpected, and unusual” requirement. These include but are not limited to:

1. Accidental breakage under normal conditions

2. Damage due to a family pet (Dyer v. Comm’r, T.C. Memo. 1961-141)

3. Any act of willful damage by the taxpayer or someone on behalf of the taxpayer.

4. Damage due to poor construction issues that are the underlying cause of the damage due to a sudden, unexpected or unusual event. (Portman v. U.S., 683 F.2d 1280 (9th Cir. Read more

Casualties And Thefts; How To Recover Some of Your Losses – Part I

What is a Casualty/Theft –

Normally, a casualty occurs when a taxpayer’s property is damaged as the result of a storm, fire, accident, natural disaster, or other similar event. A casualty loss is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, and unusual. This includes flooding, even if there is no flood insurance coverage, as long as it meets the unexpected and/or unusual definition. (Rev. Rul. 72-592 and IRC §165(h))

IRC §165(c)(3) provides an abbreviated listing of the types of casualties that are commonly allowed for deductions and the courts, in some of the cases listed here, have expanded that Read more