What Madoff Victims Can Do
If you've been victimized by Bernard Madoff's alleged Ponzi scheme, it's too early to know whether you'll get any money back.
If you've been victimized by Bernard Madoff's alleged Ponzi scheme, it's too early to know whether you'll get any money back. But there are some steps you should take now. For starters, you'll probably want to hire a securities lawyer. Then, get your records in order. If you haven't already, you or your lawyer should contact the Securities Investor Protection Corp., which recovers funds for investors in instances of brokerage failure. The SIPC can return a maximum of $500,000. To qualify for SIPC money, you must have been a customer of Madoff's brokerage firm, Bernard L. Madoff Investment Securities. The deadline for filing a claim is July 2.
If you were a customer of Madoff's investment arm, where the alleged fraud supposedly occurred, you have no recourse with the SIPC unless your money was held at Madoff's brokerage firm. However, if you invested in a "feeder fund" that directed money to Madoff's money-management arm, you might be able to sue the fund. "Feeder funds were responsible for getting under the hood of the Madoff funds," says Jacob Zamansky, a New York City securities lawyer.
You may be able to save on your taxes by claiming a theft loss on your 2008 return. You must claim a loss in the year it was discovered, so you have to do it now. If it turns out you have suffered a total loss, your claim stands. But if you later get some of your money back, you'll need to amend your claim in a future tax year.
To take the deduction, your loss must be greater than 10% of your adjusted gross income. First, add up your losses and subtract $100, says Thomas Ochsenschlager, vice-president of taxation at the American Institute of Certified Public Accountants. Then, subtract 10% of your adjusted gross income for the year from that figure.
You can write off any excess loss as an itemized deduction on Schedule A. Use Form 4684 for your calculations. File the form with your tax return.