Thank you for that additional information.
It sounds as if you had a Self-directed IRA.. This platform allows for individuals to use retirement account funds to invest in alternative investments such as real estate, but the valuation of the investment is a task typically managed by the individual, not the custodian.
In order for your distribution to not be taxable at the full rate of your initial investment, you must provide the custodian company a written appraisal or other valuation document prior to closing the account.
Otherwise, you end up with a distribution for the full amount of the initial investment since it's the last official value that the company has on file. It sounds like that is what they're stating when they point you to their agreement that states that upon account closure they will report the last known value.
In a typical IRA, the values can be derived daily by the custodian from publicly available information, but this isn't the case with real estate.
It isn't immediately clear what, if any, recourse you may have that will let you adjust that valuation with the custodian or on your tax return.
There may be additional recourse available due to the declaration of the investment as a Ponzi scheme. However, these aren't things which TurboTax is equipped to handle.
As it stand right now the IRA custodian has issued to you the document the only way that they can. They can't just take your word that the value is $0 (even if they "know" from other sources). There must be documentation their files which must meet IRS standards and conform to the custodian's policies and procedures.
The IRS records are going to reflect this as taxable income to you in the amount of your full initial investment.
I recommend that you file an extension for your 2023 tax return and reach out to a local professional near you who's well-versed in self-directed IRAs and/or real estate investments. It may take you a little time to find the best person and I would start with CPAs and tax attorneys.
You have a lot at stake here, and there may be some legal or other avenues that you can pursue for a late adjustment to the value or because of the Ponzi/bankruptcy element.
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