for Ponzi-type losses, you use section C in form 4684 to start. i advise you to read the instructions for the form and PART II of section C.
from that part.
If I have determined the amount of my theft loss deduction using 0.95 on line 46 above, I declare that I have not pursued and do not intend to pursue any potential third-party recovery, as that term is defined in section 4.10 of Revenue Procedure 2009-20.
if you intend to pursue 3rd-party recovery you can only take 75% (line 46)
since the loss involves income-producing property it will go to Schedule A. so you need to be able to itemize to benefit.
one other thing to be wary of that can affect your loss. Clawbacks. that's when attornies sue early investors that got money back to claim it for the recovery fund. This was quite a mess when it came to Madoff
