The Clawback Is A Companion To The Ponzi Scheme Deal
The Clawback The clawback is a companion to the ponzi scheme deal. It is well thought out and brings more fairness to those who have lost money. To the extent there are individuals who have made money from the scheme those profits are to be returned to the appointment trustee for distribution to the losing party. When this clawback occurs, generally the income clawed back from the taxpayer will be deductible by the taxpayer in the year it is paid. However, often the deduction in the year the clawback is paid may occur at a much lower tax bracket than the tax bracket that was applicable to the income when it was included in income. To provide for tax equity under specific circumstances, the Internal Revenue Code permits a taxpayer who includes an item in gross income in one tax year and pays tax on that item, and who is compelled to return the item in a subsequent year, to calculate the deduction on the amount that is returned in a unique way. This is known as the ‘‘mitigation’’ se...