Taxpayers not allowed Ponzi loss safe harbor
The Tax Court holds that the taxpayers had not complied with the conditions of Rev. Proc. 2009-20.
By Charles J. Reichert, CPA
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The Tax Court held that taxpayers who were victims of an embezzlement scheme could not use the safe-harbor provision of Rev. Proc. 2009-20 to deduct their theft losses because the taxpayers failed to comply with its requirements. According to the court, the revenue procedure allows the safe harbor only for the tax year a theft is discovered, which occurred before the taxpayers' years at issue.
Facts: In 1999, Michael Giambrone and his brother William founded the Platinum Community Bank in Illinois, which was owned by a holding company, Platinum Bancshares Inc., in which they held a 52.2% ownership interest. The bank struggled financially, so in 2007, stock in the holding company was sold to Taylor Bean & Whitaker Mortgage Co. (TBW) to raise capital. By early 2009, TBW owned an 82.6% interest in the holding company. Lee Bentley Farkas, the majority shareholder of TBW, was named chairman of both the Platinum bank and the Platinum holding company.