Taxes And Investment Fraud

Taxes And Investment Fraud Related Information:

Have you ever invested your hard earned money into some promising company or scheme, only to find out that the company does not exist and that all your money has disappeared?

Have you ever been a victim of unscrupulous and unethical behavior from your investment broker, which has resulted in a loss of investment?

Have you been fraudulently lured into any business dealings which guaranteed you maximum returns, but even your initial investment and capital has been eroded?

If you find yourself nodding at any of the above scenarios, then you have been a victim of investment fraud. Unfortunately, you are not alone. Everyday, more and more people are being victimized by people, some known to them and others not, and end up losing large sums of money through investment fraud.

For those who have been victims of investment fraud, it can be a very harrowing experience, not to mention the loss of money and financial security. Victims of investment fraud are often defrauded of all their invested money and feel like all is lost.

But that may not be entirely true. If you have ever lost any money because of investment fraud, then you may be eligible to receive certain tax benefits that can help you to lower your tax liability and recover some of the money lost through investment fraud.

Theft Loss Deduction

Section 165 of the Internal Revenue Service (IRS) tax code provides for some benefits to people who have lost money due to investment fraud. Section 165, a very often neglected and overlooked provision under the IRS tax code, provides for something known as a theft loss deduction, which enables you to deduct the full amount of your investment loss, because of theft, from your taxable income, thus reducing your tax liability to a great extent.

But how can I avail of this benefit as my investment loss was not due to theft but due to fraud? Good question…

Investment fraud is considered to be a kind of an investment theft, if the sales pitch regarding the investment was fraudulent, misleading, or in any manner violated the state and securities rules and regulations.

Advantages Of Theft Loss Deduction

• A standard deduction for capital losses is available for victims of investment fraud. But this deduction has a maximum limit of $3,000. With the theft loss deduction, you can claim the entire amount of your investment loss as a deduction, provided that your loss qualifies as investment theft and also depending on what your tax liability is.

• With a theft loss deduction, your tax liability could be reduced to zero, with no minimum tax liability applicable for you.

• A theft loss deduction, if more than your gross income for a given year, amounts to an operating loss, and can be adjusted towards taxes from 3 years back and carried up to 20 years ahead.

Thus, with a theft loss deduction, you can deduct huge amounts of investment losses from your taxable income and save a considerable amount of money in taxes.

Qualifying For Theft Loss Deduction

Most victims of various types of investment fraud can qualify for theft loss deduction. If you, as a taxpayer, have been specifically targeted by investment fraud and have lost money due to it, then you can qualify and make use of section 165 of the IRS tax code. But, if the person guilty of fraud did not specifically target you, then you may not be eligible for theft loss deduction.

For instance, if you invested money in a company, which went bankrupt due to criminal and fraudulent activities by its officers, then you may not be eligible for theft loss deduction. In this case, even though you have lost money due to investment fraud, the company and not you, was the main target of the fraudsters.

To fully determine whether or not you can take advantage of the benefits of theft loss deduction, you should meet with a qualified investment expert, to know whether or not you can minimize your losses caused by investment fraud through tax benefits.