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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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December 15, 2008 12:51 PM ET
Victims of the Bernard Madoff investment fraud can expect some balm in their personal financial Gilead thanks to tax write-offs for their losses— though such solace may be limited by the Internal Revenue Service’s rules. According to the Willens Report published today by tax and accounting expert Robert Willens, investment losses that result from theft are deductible in the year they are experienced, and those arising from Mr. Madoff’s alleged Ponzi scheme would qualify. Over the weekend, Spanish banking giant Santander put its client exposure to Mr. Madoff at more than 2.3 billion euros ($3.1 billion), while French bank BNP Paribas said it could face a potential loss of 350 million euros from Madoff-linked investments. HSBC Holdings reportedly could be out $1 billion. Under U.S. tax rules, such losses cannot be written off if there is “a reasonable prospect” that they can be recovered, Mr. Willens wrote in his note. Investors who lost money as a result of Mr. Madoff’s scheme are expected to try to recover as much as they can now that his firm is in receivership. And investment losses due to theft are subject to income limitations. Still, the rules can be more generous for this type of loss than for losses stemming from a decline in market value. Deductions for capital losses are limited to the extent of a taxpayer’s gains plus $3,000, while deductions for losses resulting from theft are limited to the amount that exceeds 10% of a taxpayer’s adjusted gross income for the year in question. Of course, if losses due to theft exceed that income, a taxpayer is left with a net operating loss. And Mr. Willens pointed out that IRS rules regarding NOLs related to theft are fairly generous. Mr. Madoff’s apparent victims could use the resulting NOLs to offset gains realized in the three previous years, instead of the two-year period in which the so-called “carryback” of other losses is permitted. So how much can investors allegedly scammed by Mr. Madoff recover in tax write-offs? Mr. Willens estimated they can recoup around 30% of their losses—an amount that he said “is not to be dismissed.”
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