Presentation on theme: "Tax Reporting of a Madoff Theft Loss - Some Practical Aspects Michael Gershon, C.P.A. Konigsberg Wolf & Co., P.C. 440 Park Ave South New York, NY 10016."— Presentation transcript:
Tax Reporting of a Madoff Theft Loss - Some Practical Aspects Michael Gershon, C.P.A. Konigsberg Wolf & Co., P.C. 440 Park Ave South New York, NY 10016 212-685-7215 firstname.lastname@example.org
Konigsberg Wolf & Co., P.C. 2 Overview Completing “Appendix A” Signing under penalty of perjury Statement when all information is not available Form 4684 – Reporting Casualty or Theft Loss Revenue Procedure 2009-20 Schedule A – Itemized Deductions No limitations at the federal level Form 1040 Net Operating Loss and Carryback Election Election to carryback 3, 4 or 5 years 2008 Form 1040 Form 1045 Amended Return Treatment by various states - NY, NJ, CT
Konigsberg Wolf & Co., P.C. 3 Appendix A No potential SIPC recovery under Trustee’s stated definition
Konigsberg Wolf & Co., P.C. 4 Appendix A – Missing Info When do not have all records, leave lines 1-4 blank and attach statement
Konigsberg Wolf & Co., P.C. 5 Appendix A - Statement
Konigsberg Wolf & Co., P.C. 6 Form 4684 Total deductible theft loss for all accounts on last Form 4684. Each account reported on separate form 4684
Konigsberg Wolf & Co., P.C. 7 Schedule A – Itemized Deductions
Konigsberg Wolf & Co., P.C. 8 Form 1040 – Page 2
Konigsberg Wolf & Co., P.C. 9 Net Operating Loss Net of Non-business expenses over non- business income In this case, since all non-business income was offset by non- business expenses, the NOL is equivalent to the deductible theft loss
Konigsberg Wolf & Co., P.C. 10 NOL Carryback Election NOL generated from theft loss can be carried back 3, 4 or 5 years Need to qualify as ESB to carry back the loss 4 or 5 years Less than $15MM Gross Receipts Attribution rules apply Election needs to be made by 10/15/09. Methods of making election Attaching an election statement to a timely filed (including extensions) 2008 Form 1040 Filing of Form 1045 if filed by 10/15/09 Please note that you can file Form 1045 “Quickie Refund Claim” for a 2008 loss until 12/31/09. However, in order to utilize it to make the NOL carryback election, it needs to be filed by 10/15/09 Filing of Form 1040X – Amended Return Must file amended return for the earliest taxable year to which you are carrying back the 2008 NOL. Print across the top of the form “Amended NOL Carryback Election Pursuant to Rev. Proc. 2009-19”
Konigsberg Wolf & Co., P.C. 11 NOL Carryback Election – With Return Indication of the number of years you are carrying back the loss.
Konigsberg Wolf & Co., P.C. 12 Form 1045 – NOL Indication of how many years you are carrying the loss back.
Konigsberg Wolf & Co., P.C. 13 Alternative Minimum Tax Theft loss is deductible for AMT Separate NOL Calculation for AMT purposes Takes into account AMT adjustments Utilization of AMT NOL is limited to 90% of AMT taxable Income
Konigsberg Wolf & Co., P.C. 14 Related State Tax Issues New York – TSB-M-09(7)I In general, follows the IRS safe harbor Treats loss as an itemized deduction subject to normal NYS limits NYAGI > $100,000 – 25% reduction NYAGI >$475,000 – 50% reduction Notice states “Nonresident individuals may not carry NY NOLs forward or backward to a year in which the individual was a resident of NYS” In informal conversation with NYS personnel, this does not mean what it says. If in 2008 you were a non-resident of NY, you can carry back the loss to earlier years when the individual was a resident. New Jersey – Press Release April 2, 2009 2008 loss is a reduction to the category of “Net Gains” or income from disposition of property Who had gains in 2008???? No carry forward of losses or carryback of losses Legislation has been introduced that would allow amended returns to be filed in all open years to remove Madoff income to the extent of the theft loss. Connecticut – AN 2009(7) No effect on 2008 CT tax return as itemized deductions (including theft losses) are not deductible for Connecticut purposes If theft loss generates a federal NOL, then you must file amended CT income tax returns for the carryback years for which you use the NOL for federal purposes. Make sure to check the box “Yes” on the CT-1040-X to the question “are you amending your return as a result of federal or another state’s changes?”