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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

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