WASHINGTON — Investors allegedly defrauded by Bernard Madoff and R. Allen Stanford will be allowed to claim theft losses as deductions on their tax returns, Internal Revenue Service Commissioner Doug las Shulman said Tuesday.
Shulman told the Senate Finance Committee the agency is creating procedures for investors who may need to amend their tax returns.
“The IRS is today issuing guidance articulating the tax rules that apply and providing ‘safe harbor’ procedures for taxpayers who sustained losses in certain investment arrangements discovered to be criminally fraudulent,” Shulman said.
The guidance classifies the losses as theft losses rather than capital losses, giving most victims a bigger deduction. In addition, a special limitation that sometimes reduces deductions by 10 percent won’t apply, according to the new guidance.
“They can be utilized immediately,” Shulman said.
Madoff, 70, pleaded guilty to bilking investors around the world even as he promised steady returns, including fictitious capital gains he may have falsely reported to the IRS.
Stanford, 58, is accused by the Securities and Exchange Commission of running an $8 billion Ponzi scheme.
