Ponzi scheme losses appear to continue to be available under Section 165(c)(2) following tax reform. The losses that were limited by the TCJA were personal casualty losses subject to Section 165(h). Personal casualty losses are losses not incurred in connection with a trade or business or a transaction entered for profit. Rev. Rul. 2009-9 provides that Ponzi scheme losses are considered losses arising from transactions entered for profit under Section 165(c)(2) and are not subject to the limitations under Section 165(h) or the limitation on miscellaneous itemized deductions.
The primary negative impact of the TJCA on these losses is the elimination of the NOL carryback. Taxpayers suffering these losses will now need to carry them forward which may delay realization of the tax benefit of these losses. The safe harbor methods for claiming the loss outlined in Rev. Proc. 2009-20 appear to still be valid for 2018 returns and are outlined in the instructions to the Form 4684
