The Ponzi Clawback And The Value Of The Mitigation Procedure

By Richard S. Lehman, Esq.

It is important to understand that the clawback falls under the Internal Revenue Code section that deals with financial losses. The importance of this is because the Trump new tax bill left the ability to take deductions and to use the mitigation section in Ponzi schemes because Ponzi schemes were transactions entered into for profits.


The Trump tax bill went a long way to eliminate the deductions from thefts that were not thefts that were a result of you trying to make money in an investment scheme or in a business. There is no loss carry backs or deductions from Ponzi schemes or a deduction from a clawback. Under the new Trump Tax bill however if you claim the mitigation section that's when you can go back and use your carry backs and carry forwards.

This unique section in the Internal Revenue Code. It's a little bit complicated. And that's because they did not want people who were really not entitled to go back and reopen the statue of limitations. They just didn't want everybody to be able to go back and reopen statutes and claim deductions and they've limited to a certain category of losses. And one has to understand this code section and to appreciate how valuable it is. This is designed to allow someone who pays funds back in a clawback to be able to go back to the year in which the clawback income was earned for tax purposes exclude the income to calculate which tax result would be more valuable to either claim the clawback as a deduction in the year in which it was incurred or to claim the clawback.

Browse the FTX Tax Survival Kit - and remember  - value can be lost without good professional advice.

Learn more about the taxation of the clawback in this 50-minute educational video presented by Tax Attorney, Richard S. Lehman.




Location: Lehman Tax Law: 2000 Glades Rd #312-A, Boca Raton, FL 33431, USA

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