If
it is a Ponzi type scheme, it is reported as a Casualty and Theft. Please see
the links below.
https://www.irs.gov/pub/irs-drop/rp-09-20.pdf
https://www.irs.gov/pub/irs-drop/rr-09-09.pd
Mark "Revenue
Procedure 2009-20" at the top of the Form 4684, Casualties and Thefts, for
the federal income tax return for the discovery year. The taxpayer must enter
the “deductible theft loss” amount from line 10 in Part II of Appendix A of this
revenue procedure on line 34, section B, Part I, of the Form 4684 and should
not complete the remainder of section B, Part I, of the Form 4684.
