@rofo200
@DoninGA
maybe deductible because of a Chief Counsel Advice - 2025
https://www.taxnotes.com/research/federal/irs-private-rulings/legal-memorandums/some-scam-losses-sti...
key to being deductible is that the loss incurred involved a transaction entered into for profit under §165(c)(2).
There are 5 examples. None involves a PONZI scheme. All would be classified as a theft loss but only the first 3 were entitled to a deduction - transaction entered into for profit. The last two were scams that did not involve a profit motive - romance and kidnapping scams
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This Chief Counsel Advice responds to your request for non-taxpayer specific advice regarding the allowance of theft losses under Internal Revenue Code (“Code”) §165 for victims of certain scams. We are aware that taxpayers have suffered losses from various scams perpetrated by unknown individuals operating domestically and internationally. This memorandum addresses several common scenarios; however, the actual scam may vary, and the application of this advice is dependent on the taxpayer's specific facts.
