Investment in a Real Estate Private Equity firm declared it as a Ponzi Scheme

Invested in a Real Estate Private Equity firm but SEC declared it as a Ponzi Scheme. Form 4684 allows the loss as an Itemized Deduction with Passive Loss (have no Passive Gain). Heard from others that this can be taken as on offset to all income (Investments, SS Benefits, etc) - How can we do this for 2022 Return?

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Expert Alumni

Apr 1, 2024 6:01:10 PM

If you are working on a 2022 tax return using TurboTax, you must be using the desktop version. To report your Ponzi scheme loss:

With your return open, switch to Forms mode by clicking on the Forms icon in the upper right hand part of your screen.
Click on "Open Form" on the upper left
Type in "Form 4684 Worksheet"
Open the Form 4684 Worksheet
Check Box 5c and then click on the QuickZoom right below it to go to Form 4684, page 3 to report Ponzi-Type loss
Complete Parts 1 & II of page 3, and then click on the QuickZoom B at the bottom of the screen to go to Form 4684, page 2.
Your deductible loss should appear on lines 28, 29, 30, and 32.
Click on Schedule A under Forms in My Return
Your deductible loss should appear on line 16 Other as Casualty and Theft Loss, and also be included in the amount on line 17 - Total Itemized Deductions

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Investment in a Real Estate Private Equity firm declared it as a Ponzi Scheme