taxdan Posted March 28, 2008 Report Share Posted March 28, 2008 Client gave $10,000 to an individual claiming to be part of a company called Network Group. It was supposed to be an investment in a piece of real estate. Individual took the money and ran. Client feels really stupid. Can the client deduct this as a capital loss on Sch D? I would imagine he would need some sort of proof that he attempted to get his money back. Any advice is appreciated! Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 28, 2008 Report Share Posted March 28, 2008 Did the client file a police report or write to the state regulatory authorities or BBB concerning the scam? Does the client have any news articles or other third-party info to support the worthlessness of the investment? How about mail sent to the scam artist that has been returned undelivered? There must be some evidence that the person who took the money is no longer reachable. I'd assume the return is going to be audited and document the file accordingly, although I've done several of these for this much money or more and never heard a word from IRS about them. Part of what you are doing is making sure that you are not being scammed by the client. Quote Link to comment Share on other sites More sharing options...
taxdan Posted March 28, 2008 Author Report Share Posted March 28, 2008 Thanks for the advice. I will ask all of those questions and more and if I don't feel the client has taken the proper steps to retrieve his money, I will leave it alone. Otherwise I will file it as a capital loss. Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted March 28, 2008 Report Share Posted March 28, 2008 If your client contacted an attorney have the client, if possible, get a letter from the attorney stating that it would cost more to try and collect the $10,000 then it is worth. For a theft deduction you only need to prove 1. the amount of the loss, 2. that the loss was a crime under local law, 3. and the chance you collecting is almost nil. Quote Link to comment Share on other sites More sharing options...
dsheth82 Posted March 28, 2008 Report Share Posted March 28, 2008 ohh. shit.. my friend just loaned $10,000 for the same type of investment to some individual.. for 10% return.. i better warn him. Quote Link to comment Share on other sites More sharing options...
Redneck Posted March 28, 2008 Report Share Posted March 28, 2008 Thanks for the advice. I will ask all of those questions and more and if I don't feel the client has taken the proper steps to retrieve his money, I will leave it alone. Otherwise I will file it as a capital loss. Would this not require a Casualty Loss, Form 4684? I don't think you can just report it on Schedule D only. Quote Link to comment Share on other sites More sharing options...
indyscott Posted March 29, 2008 Report Share Posted March 29, 2008 I agree w/ Redneck, it is substantially a theft. Quote Link to comment Share on other sites More sharing options...
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