I lost my IRA funds due to a ponzi scheme in 2015, How do I record this?

[huskereurocat]

I have had a self directed IRA for a couple of years now and during 2015 the investment went bust since it was involved in a ponzi scheme. I don't remember getting any official forms to report this to the IRS. I am now wondering how I report this to the IRS?

[bwa · Accepted solution]

If this is a traditional IRA and you deducted all contributions you would have no further loss.  (You can't deduct the contributions when you put them into the IRA, and then deduct them again when the investment goes South.)

If this is a Roth IRA or a traditional IRA with non-deductible contributions, you may have a deductible casualty loss.

[huskereurocat]

So there is nothing to do now, right? It is just when, during my retirement, I would take out the funds I would pay taxes on the funds. In my case I would never pay taxes on the funds because they are not there to withdraw, correct?

[bwa]

If the funds lost all value while within the IRA you would never pay tax on them, as there is nothing to withdraw.

[huskereurocat]

Thanks, I appreciate the help!!

[SunnySD]

Hello,

I lost money in a ponzi scheme in 2015 too!! I rolled some 403B money into a self-directed IRA, and now, since the ponzi scheme has been identified, I am out the money.... and unsure if this is a loss or not. Custodian of the self-directed IRA wants to issue me a 1099-R.... but has not told me in what amount. Is there any advice people can share as to how I might handle this? I don't want to pay taxes on money I've lost, and ideally, feel like i should be able to deduct this loss against any capital gains in my brokerage account. Pls. help! Kind Regards...

[VolvoGirl]

If it came from a 403B Account it was probably never included in your income and taxed in the first place.  So you can't deduct a loss.  You take the loss by never having to include it ax income.

[dmertz]

You will probably need to provide the Custodian with a formal professional appraisal of the now valueless asset, otherwise the custodian will likely report the value of the distribution as the amount originally invested in this asset.  Ask the custodian about this.