@PJC4
Its been awhile since I did the loss and subsequence recovery reporting and with the tax law changes, not sure if slightly different. But here are the general ideas
In my case, all the loss was consumed in ponzi scheme discovery year tax filing. Thus the remaining action were the subsequent year recoveries. Recovery account is an honor system. Following is my situation
75% Safe Harbor loss. All consumed in Sched A Other Misc Deduction. My situation for this year allowed most of the loss to be useful. Need to study individual tax cases to evaluate this.
Had ~4 loss recoveries over next 3-4 years. Calculation is as follows
First 25% recovery is tax free (after the 75% safe harbor). No forms to enter this. Just track in own spreadsheet
> 25% recovery is ordinary income (since loss has been 100% deducted in taxes) and flowed in from newer tax forms sched 1 line 10 with a stmt stating recovery from prior ponzi loss.
So how much to enter as income all depended on own spreadsheet calculations. Other factors such as phantom income need to be added to original loss (investment paid dividends that just rolled back into investment and lost but had to report as income and paid taxes). Recoveries can be in the form of a check or sometimes issued 1099 (depending on recovery source and path) and all have to be entered properly.
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In your case, if the loss can not be fully consumed. Then probably need to spread it out via NOL carryfwd carryback some how (probably instead of Schedule A loss deduction?). I've no experience with NOL carry fwd/back but knew some follow Ponzi victims that did that (their CPA did) for precisely the reason that it can not be fully/usefully consumed completely under schedule A and therefore benefit would probably be lost through schedule A deduction path.
