Tuesday, July 2, 2019

Changes Resulting From The Trump Tax Bill

The Tax Law Still Allows A Tax Recovery Of Financial Theft Losses

My experience of a small sample accountants and lawyers has revealed that many do not know that there still is a business tax deduction for Ponzi Scheme losses and similar financial frauds that were invested in for profit.

There also still is a “Clawback” or “mitigation” deduction available for investors that have made money in the Ponzi Scheme and must now repay to the investors that have lost money, the profits and at times the original invested principal of investors who profited from the fraudulent business scheme.

Consequently, there will continue to be a valuable deduction that can be as high as 50% of a tax on income; to those in the states and cities with high state and local taxes.

The tax benefits available to investors who innocently profited from the fraud and now must pay back the profits made in the theft and in some instances, the investors’ principal (capital) would be subject to a “Clawback”.  The Trustee must protect the innocent investor who lost money because of the fact there never was any profit at all, since the invested funds were paid to the fraudulent thieves.  This is called a “Clawback”.


Code Section 165(c)(2) and 1341 of the Internal Revenue Code provide great help for the defrauded investor.

There are three items that have changed in this area of the law as a result of the “Trump Tax Bill.”  The first is that starting in 2018 there is no longer the right to carryback losses from financial theft.  Deductible losses resulting from a financial theft may only be claimed in the year of the discovery of the theft and future years.

The second change is that tax rates have been lowered so that tax refunds that stem from post year 2018 financial theft losses, (not been discovered until after the year 2018 and after), may be refunded in a lower tax bracket than that which was available prior to 2018.

The third change in the law is the fact that the tax information Form 4684 that is used to report the theft loss has been clarified.

While a fraudulent theft loss in a trade or business or a for profit endeavor has been modified, that Code Section still provides for the deductible theft loss for a victim of a financial theft.  Code Section 165(c)(2) still provides for the deductible theft loss for a victim of a financial theft that amounts to a criminal act.

For your convenience we have posted the full article. The original is posted on Richard S. Lehman's website here: www.LehmanTaxLaw.com

Thursday, May 23, 2019

The Ponzi Clawback And The Value Of The Mitigation Procedure

A Ponzi Scheme Clawback of profits is typical in many Ponzi Schemes.

Ponzi Scheme Trustees appointed to achieve fairness among defrauded investors have successfully recovered billions of dollars from Ponzi Scheme investors who withdrew funds from the Scheme even though there were indeed no real profits at all in a Ponzi Scheme. Everyone but the promoter eventually loses money. The promoter usually goes to jail and losses money.

 Those investors lucky enough to have escaped the Ponzi fraud and taken their profits early in the scheme, remained profitable until the Trustee “CLAWED BACK” their false profits.

 A Ponzi Scheme “Clawback” is accomplished when a Trustee obtains refunds from those who benefitted from the early “profits distributions” by the Ponzi Scheme.

 Clawbacks of Ponzi Scheme profits from the innocent investor who first benefitted from the Scheme can receive a unique treatment from a tax standpoint. This is because of a special Internal Revenue Code Section that applies to clawed back profits. READ FULL ARTICLE HERE

Wednesday, March 27, 2019

This video has been completely updated to reflect the new Trump Tax Cut And Jobs Act of 2017

The Trump bill eliminated the loss carryback rules, it did not eliminate the rules under the Mitigation Section. 

Taxpayers who are forced to repay false profits may still reduce the income falsely reported in the prior years, if that provides a larger tax refund than the refund that would be available if the "clawed back" funds were only allowed to be deducted in the year of payment.

This tax benefit cannot be overlooked.

Starting in 2018, it is critical to compare the amount of refunds on a Clawback of profits with the value of deducting the Clawback amount in the year it is paid back.

Richard S. Lehman, Esq.
United States Taxation and Immigration Law, LLC
2600 N. Military Trail, Suite 206
Boca Raton, FL. 33431

Tel: 561-368-1113
Fax: 561-981-8203
Skype: LehmanTaxLaw