In news that may be of interest to investors in Sunrise Equities, the IRS has recently announced that victims of Ponzi schemes can now claim their loss as a tax-favored “ordinary loss” rather than as a “capital loss”, as was previously required.

http://www.smartmoney.com/personal-finance/taxes/tax-breaks-for-ponzi-scheme-victims/?page=all

“The IRS generally takes a dim view of taxpayer attempts to treat investment securities losses as anything other than capital losses. Capital losses fare poorly under our beloved federal income tax system. You can only deduct them to the extent of capital gains for the year, plus another $3,000 ($1,500 if you use married filing separate status). Any leftover capital losses get carried forward to the following year, and the same limitation rule applies all over again.

As a result, it can take years to fully deduct big capital losses.

In contrast, ordinary losses are treated quite well. They can be written off against any type of income (salary, interest, dividends, capital gains, self-employment income, you name it). If you have a big ordinary loss that exceeds what you can deduct in the loss year, the excess can potentially create a net operating loss. You can carry a net operating loss back to previous years and recover taxes you paid earlier, or you can carry it forward to shelter income in future years, which will be especially helpful if tax rates go up.”

Lakeshore Law Group LLP is not an accounting firm and this information is not intended to constitute accounting or tax law advice for any client or non-client. All individuals and entities should consult a qualified accountant or tax professional.