Lessons from the Tax Court - Business Management Daily

Have you lost money in an illegal investment scheme? Even if you haven?t been fleeced by Bernie Madoff or some other high-profile shark, it can still hurt you plenty in the wallet. ?

Strategy: When it?s appropriate, claim an investment theft loss for your troubles. For tax purposes, most investment losses are treated as capital losses, which are subject to strict limitations on deductibility. In contrast, losses that can be properly characterized as investment theft losses are treated as ordinary losses, which can be deducted without limitation. (Unlike a ?regular? theft loss, the allowable deduction for an investment theft loss is not reduced by 10% of your adjusted gross income.)

On the other hand, as evidenced by a new case, you won?t necessarily qualify for an investment theft write-off just because you have an investment that went sour.

New case: A taxpayer invested in unsecured interest-bearing notes sold by American Business Financial Services (ABFS). After receiving monthly interest checks, he invested more money. Subsequently, ABFS began defaulting on its obligations. The taxpayer claimed an investment theft loss based on his unrecovered funds, but the IRS challenged the deduction.

The district court in Ohio examined the definition of theft offenses under state law. In this case, the taxpayer must prove that the accused engaged in a deceptive act intended to deprive the owner of possession of property or services. Furthermore, the accused?s misrepresentation must have caused the property to be transferred.

The court noted there was no evidence that ABFS possessed a criminal intent to deprive the taxpayer of his money without planning to pay it back. The monthly interest payments indicated otherwise. In addition, there was no evidence to support the taxpayer?s claim that he relied on fraudulent misrepresentations by ABFS. Case closed in favor of the IRS. (Labus, DC-No. Ohio, No. 5:11-cv-01856-JRA, 9/27/12)

Like what you've read? ...Republish it and share great business tips!

Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...

We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.

The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.

" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/33841/lessons-from-the-tax-court-salvage-tax-loss-from-scams "

Source: http://www.businessmanagementdaily.com/33841/lessons-from-the-tax-court-salvage-tax-loss-from-scams

wii u American Music Awards turkey brine Imessage Not Working mc hammer pecan pie recipe Hector Camacho