California Senate Reviews Madoff Scheme’s California Impact

By Ron Cohen, CPA, MST
Partner
Greenstein, Rogoff, Olsen & Co., LLP

The California Legislature is considering law changes for Madoff losses. However, in the current budget crisis, it is hard to see how they can help.

California law makes no provision for recovering taxes paid on “phantom income.” State law currently does not allow victims to carry-back these losses as a “theft loss,” and even under provisions being discussed by the Internal Revenue Service a theft loss could only be counted against income from the past five years or future income in the next 20 years. Many of those who have lost the most in this scheme are elderly individuals for whom their investment savings was their main source of future income.

At least 429 individual Californians – not including businesses or charities – fell victim to the global Ponzi scheme which robbed investors of some $65 billion dollars and earned Madoff a lifetime in prison. Many small investors lost their life savings and now face the loss of their homes as well.

On top of those losses, hundreds of Californians have been dutifully paying taxes to the state on income they believed they had made as a return on their investments, which they now know does not exist.

We’ll see what proposals arise.

See: http://dist16.casen.govoffice.com/index.asp?Type=B_PR&SEC={5E36B143-3FBF-4945-AD03-0BAE9ED9CB67}&DE={CB9BDE55-1C5F-4D5B-A930-43EAD2666AEB}

We’d be a happy to assist taxpayers to claim Madoff or other Ponzi Scheme losses.

I am always available for questions or comments at (510) 797-8661 x237.