If an individual is scammed thru a Ponzi scheme type operation, one option is to use 4684 and take the loss as theft and apply the loss to up to 95% of 2023 income, if that's the year of loss. After reading every detail of Ponzi scheme guidance, I can NOT see where you can claim that loss for 2023 as theft and then carryover the remainder of the loss to future years as an NOL. I noticed one contributor here noted that for 2023 the NOL would have to be the result of a natural disaster in order to do that. I read that also in IRS guidance. I can see that you might report part of the loss as investment loss and use the $3,000/year deduction for the next 20, which means you're going to call part of your loss a theft loss, and part of it an investment loss. So I may well be misunderstanding the guidance. She has always filed a typical married joint return, and has never filed a return with a Schedule C in the past.
How can an individual trader (who lost $450,000) in a Ponzi type scam in 2023 and made $250,000 joint marital income from day jobs in 2023 and has traded (not daily but most days) stocks for 5 years best recoup her loss? She's been reporting trades on Form 8949 (not Schedule C). She thought she'd found a new career in cryptocurrency trading, but lost $450,000 in a scam, $250,000 from savings in $200,000 from loans she is now repaying. As I read the guidance, looks like she could recoup the $40,000 in taxes she paid in for 2023, and maybe recoup $3,000 capital loss for 20 years if she reported $60,000 of the ponzi loss as stock trades on 8949. Can you guys who know this area help her and me out? I've consulted my friend, a much better CPA, but neither of us has every dealt with Ponzi losses. What's the best option for this woman when she files her extended 2023 return soon, and have a chance it will hold up under IRS scrutiny? She's a friend and I don't want to see her lose the opportunity to at least recoup 2023 taxes but also don't want to miss an opportunity for a carryforward. Help would be much appreciated!
