My name is Richard Lehman, I have been a tax lawyer for 54 years and it has been a privilege

After many years of mostly working in the international tax field, a guy named Bernie Madoff came onto the scene along with hundreds and maybe thousands of investors, who had been fooled by Madoff into thinking they were making significant profits when it was all a sham. 

Bernie Madoff was a thief. I have since found out that there are many Bernie Madoffs stealing money from their investors.

Bernie Madoff’s investors thought that they were making big profits. Instead they were losing money because Bernie Madoff never made profits; he only made money that never produced profits, except for Bernie Madoff.

I also found out that there were a lot of thieves financially ruining a lot of people and I would like to think that I was able to help many people recoup at least a portion of what they lost.

Bernie Madoff was the straw that broke the camel’s back, racking up almost fourteen billion dollars in stolen funds ($14,000,000,000).

However, as a result of the disaster that he caused, it led to something good. For the first time, the Internal Revenue Service decided to clean up their act and make major changes to the law.

The year was 2008 and there was chaos in the I.R.S. about how to deal with this.

Bernie Madoff took your money, did not invest it in anything except his pocket and harmed hundreds if not thousands of people in what is known as a “Ponzi Scheme” attributable to Mr. Ponzi who predated Bernie and did the same thing. Sadly, by 2008, Bernie had run out of money and crashed.

In 2008, the Internal Revenue Service was not ready to solve the disaster. However, they quickly did the best that they could and published two documents to at least help the victims of this scheme. The two documents provided some relief to injured parties. These two documents were sorely needed and well done. 

While they could not stop “Ponzi Schemes”, they have lessened the blow on injured parties. These two seminal documents spelled out the treatment for “Ponzi Schemes” in: 

1. a revenue ruling, and 
2. a revenue procedure that would govern the treatment of “Ponzi Scheme” victims.

The first document is a revenue ruling. (Rev. Rul. 2009-9) This ruling describes the proper income tax treatment for losses resulting from “Ponzi Schemes”.

The second document provided the procedures for a simplified, unified way of dealing with “Ponzi Schemes” and their investors. (Revenue Procedure 2009-20). These two documents are the heart of this review.

Report No 1: The FTX/ Sam Bankman-Fried Fraud

Report No 2: The Reasonable Prospect of Recovery

Report No. 3: The Safe Harbor

FTX Tax Survival Kit: https://www.lehmantaxlaw.com/ftx/

Top Two Critical Mistakes When Dealing With Ponzi Scheme Tax Losses

The two most critical mistakes that result in the loss of the maximum advantage of tax deductions seem to be:

1. the failure to deduct the tax losses in the proper year, and
2. to enter into settlements that may turn the ordinary theft loss into a capital loss that will be of much less value. The latter can occur for example, if an investor were to accept shares of stock as part of a settlement and then those shares of stock (a capital asset) lost all of their value.

Learn more with this Report #1 on the FTX Ponzi

https://www.lehmantaxlaw.com/ftx-ponzi-scheme/

The Sam Bankman-Fried, FTX fraud was a Ponzi scheme

The Sam Bankman-Fried, FTX fraud is a Ponzi scheme and losses from Ponzi schemes are acknowledged by the I.R.S to be “theft losses”. They are deductible from a taxpayer’s ordinary income.

The theft loss tax deduction is an extremely valuable tax deduction and for many victims of the FTX fraud the deduction will have a cash value equal to 35% or more depending upon state and city income taxes. Investors who are subject to federal, state, and city income tax may find that their recovery from the tax loss is equal to almost 50% of their theft loss.

Richard S. Lehman, Esq.
Lehman Tax Law

Taxation of Ponzi Clawbacks and Tax Refunds from a Ponzi Scheme

Richard Lehman presents FREE webinars for professionals and their clients.

Dates of "Taxation of Ponzi Clawbacks and Tax Refunds from a Ponzi"

• Wednesday, November 06, 2019 | 10:30 AM EST
• Wednesday, December 11, 2019 | 10:00 AM EST
• Tuesday, January 28, 2020 | 11:00 AM EST

LEARNING OBJECTIVES

1. Explore a world where you can be a millionaire one day and broke the next. Welcome to the world of Bernie Madoff.
2. Identify the techniques available for defrauded investors to recover funds in the form of taxes they will not have to pay for a financial theft loss.
3. Discover the procedures that investors who made money in fraudulent investment schemes must face years after the investment has crashed.
4. Recognize that there are alternative methods of recovery of taxes paid from a Clawback.
5. Learn what is the “Safe Harbor” and Ponzi Scheme tax recovery.

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