Since you lost cash, it would not be a capital loss.
This probably meets the definition of an investment Ponzi scheme loss as outlined in IRS Revenue Procedure 2009-20 because lead figure(s) of FTX were “charged by indictment or information (not withdrawn or dismissed) under state or federal law with the commission of fraud, embezzlement or a similar crime that, if proven, would meet the definition of theft ….”
You can use the safe harbor procedure outlined in Rev. Proc. 2009-20.
Here’s what to do in TurboTax:
- Type casualty loss in Search (magnifying glass) in the upper right
- Tap Jump to casualty loss
- On “Casualties and Thefts” select YES
- On “Casualty or Theft Event” enter a description and date. Under Property Type choose Income Producing Property (e.g. Business property, Investment property)
- Complete all the screens.
Under the safe harbor rule, you can claim (a) 95 percent, for a qualified investor that does not pursue any potential third-party recovery; or (b) 75 percent, for a qualified investor that is pursuing or intends to pursue any potential third-party recovery.
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