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Level 2
October 17, 2022
Question

being scammed consider capital loss in federal return?

  • October 17, 2022
  • 1 reply
  • 4 views

Can any tax experts kindly advise whether being scammed consider capital loss when file federal return? Thanks. 

    1 reply

    Level 15
    October 17, 2022

    Scammed in what way?   Casualty and theft losses are not deductible on a federal return since the tax laws changed for 2018 and beyond, except for certain Ponzi-type scams.

     

    https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-reform

    **Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
    Mimi2022Author
    Level 2
    April 18, 2023

    Hi, thanks very much for your kind reply. I didn't notice till today. Sorry for the late reply. I was contact by someone claimed as a financial advisor through LinkedIn. I normally very alert about scam never before had been talked into investing in cryptocurrency. But this person was extremely persistent. Even force to send "cryptocurrency' from its(not sure it is man or woman) account. Even I was nearly angry. But this person said if I don't 'accept' from my end, it will be disappeared. The person will take a lost. I felt sorry for it. So I accepted and send it back to this person. Long story short, this person persuades me open two accounts: one on a known legit platform: coinbase;  another  one is called "Ocean" app. I thought if I am the one open the accounts, nobody would be able to access, so one thing after another, I invested (I actually at that moment at very difficult moment of my life, job changing, very sick family member and much more), those are my excuse to persudge myself not go crazy being shamed and angry after I realized I got scammed. Because this person pretends directing me trough Whatsapp(how we communicate) to a big event of invest. The 2nd day this person said the market went badly, I need to put more money to rescue. That moment I woke up. I realized this must be a scam, but I didn't understand that moment how could they get my money if I have been the one handling my investment under this person's direction. As a computer science major, I realized that the only way they can scam me is through a fake website. So I told that person I will file a police report. At that moment, I didn't know this is an organized crime. The police and detective assigned to my case did research, they said there are many people being scammed by the same organization. Anyway, sorry for such long reply, thought you might need it to answer my question whether this is considered tax write off(?). The detective told me this situation can get tax credit since getting my money back is so slim of chance. These people mostly operate from all over the world. Can you please advise whether my case can be considered Captial lose or anything else that can help me a little bit. I lost my life savings. Yes, it is shame I fall for it. I never think this could happen to me since I have been very alert about scam and I am not greedy person even. Thanks for any professional advise you could give. 

    Alumni - Champ
    April 18, 2023

    Per IRS Publication 544, in order to have a capital loss (or gain), you must sell or exchange a capital asset (such as cryptocurrency).

    From your description of events, it doesn't appear that you ever had ownership of a capital asset.  Therefore it appears that you don't have a basis for claiming a capital loss.   

    https://www.irs.gov/pub/irs-pdf/p544.pdf

     

    Instead, you have a theft loss, as described by @xmasbaby0.

    **Answers are correct to the best of my ability but do not constitute tax or legal advice.