Ponzi Scheme Losses Carried Forward

[Chuckles]

I was the victim of a Ponzi type scheme starting in 2006; discovered in 2009 and claimed as a theft loss on my taxes last year. I would like to use the balance of my losses against my income for 2010. My problem is finding a clear explanation of how to calculate the carry forward amount after the first year. All government publications, that I've found, treat the loss as a business loss when the definition of what happened is considered a theft. As a business loss, the calculations take into account long and short term capital gains and losses which have nothing to do with this loss! And, the calculation done with form 1045 Schedule B deducts my income to calculate the carryforward. Shouldn't the loss be carried forward without these deductions? Help!!

[jainen]

>>how to calculate the carry forward amount after the first year<<

When they say "theft loss" they mean it is not a capital loss from an investment. And since it derives from a transaction entered into for profit, it is treated like a business casualty in that it is not subject to the 10% threshold. It was deductible in 2009 (year discovered). If it exceeds 2009 income, it is not carried over as such but contributes to a Net Operating Loss. The NOL calculation does indeed look at other income, so there may be no carryover at all. Also, it is too late to elect to carry an NOL forward to 2010--it must be carried back first.

[Jack from Ohio]

Your tax software should take care of handling the carryback.