May 12, 2009
NYSBA: Tax Issues Faced by Investors in Ponzi Schemes
The New York State Bar Association Tax Section yesterday released a report on Tax Issues Confronting Private Foundation Investors in Ponzi Schemes and Other Frauds.(No. 1183):
Bernard L. Madoff ... [has] admitted to defrauding investors out of upwards of $65 billion. Although the Madoff fraud has been the main focus of the press and tax commentary, foundations need guidance on how to treat investments in all of the various Ponzi schemes and other frauds that have come to light in connection with the downturn in the economy.
This report primarily is intended to identify the issues that foundations and the IRS need to address in connection with foundation investments in Ponzi schemes. For each of the identified issues, this report will discuss alternative approaches for addressing the issues and, to the extent available, will identify relevant statutes, Regulations, case law or other authorities.
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