claiming deduction for crypto scam

[taxtattoo]

LInk to IRS.gov In other words pig butchering scam.

Is it possible to claim the deduction as a theft if the intention was for a profit transaction?

Per this link, it is allowed: https://www.irs.gov/pub/irs-wd/[removed].pdf

Wanted to get inputs from other tax pros.

[rjs]

In most cases there is no deduction for theft loss. The recently published Chief Counsel Memorandum provides a possible exception, but it's very complex and involves a lot of legal technicalities. You have to consult a tax attorney (not a CPA) who can review all the details of your particular situation and advise you as to whether you qualify for the deduction.

[taxtattoo]

But the recently published document with a date of 3/14/25 clearly says a deduction is allowed.  The pig butchering scam listed in the document is the exact scam I was a target. The article does not mention anything complex. What am I missing?

Thanks!

[rjs]

One thing that you're missing is a law degree. The situation might not be a simple as you think. I don't know what else you might be missing because (a) I am not a lawyer, and (b) I don't know any of the details of the scheme you lost money on. Just saying that it was "pig butchering" is not nearly enough detail. And don't bother posting more details, because no one here is going to give you legal advice. Talk to a tax lawyer.

[cortesanibal]

If your intention was to make a profit—for example, through investing or business activity—then:

The theft loss may still be deductible as a business or investment loss, depending on how it’s characterized.

My aunty was a victim of romance scam and was only saved when she reported to (Spirassp . com) recovered lost funds. This is so sad and hopefully people can avoid pig butchering scam by being aware of these 5 ways of how it occurs..

1. They initiate contact by reaching out to you on social media platforms or a random text pretending to have sent the wrong message.
2. They build trust by trying to be friendly or start of a romantic relationship over weeks or months gaining the victims trust and confidence.
3. The scammers introduce you to a "too good to be true" investment in crypto, forex or stocks often showing fake profits.
4. The scammers encourage their victims to make a deposit by starting with small amounts first, seeing fake returns which leads to them investing more.
5. When it's time for withdrawal, the victim is met with delays, extra fees or account restrictions. Eventually, the scammers disappears with the funds.

Here are some red flags to watch out for;
- Unsolicited messages from strangers
- Promise of high returns with little risk
- Pressure to invest quick
- Fake trading platforms that look real but don't allow withdrawals