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Random Question re: Ponzi Schemes
Posted on 6/1/22 at 10:08 pm
Posted on 6/1/22 at 10:08 pm
When an investor is involved in a Ponzi Scheme (and does not realize it at the time). When they decide to sell and collect some profits, which is obviously made up of fake return statements, does the investor report these fake documents to the IRS and pay capital gains tax on fake returns? How does the IRS not realize there was actually no capital gain..?
Posted on 6/1/22 at 10:18 pm to tigerforever7
It was taxable income to you and you are lucky that it was.
Posted on 6/1/22 at 10:20 pm to tigerforever7
Anyone going to the trouble to falsify statements is probably willing to falsify some 1099's too. Why would they care if you report it - the IRS is happy to accept that money even if they haven't received the corresponding 1099.
Posted on 6/1/22 at 10:56 pm to tigerforever7
Profits from criminal activity is taxable.
You don't remember the IRS notice to report gains from theft?
You don't remember the IRS notice to report gains from theft?
Posted on 6/1/22 at 11:11 pm to tigerforever7
You can owe taxes on investment funds before you cash out, and many Madoff investors paid lots of such taxes on fake paper capital gains and dividends. They tried without much luck to get it back from the IRS, but some were allowed to take a deduction for losses due to the fraud.
Some early investors cashed out before it all collapsed, and they walked away with billions of dollars that Madoff claimed were their investment profits, but were really just newer investors’ deposits. Many had to give back the money to be distributed to all victims fairly. One widow lady had to pony up over $7 billion that her late husband had cashed out.
Some early investors cashed out before it all collapsed, and they walked away with billions of dollars that Madoff claimed were their investment profits, but were really just newer investors’ deposits. Many had to give back the money to be distributed to all victims fairly. One widow lady had to pony up over $7 billion that her late husband had cashed out.
Posted on 6/1/22 at 11:36 pm to tigerforever7
Slightly off topic, but the wildest Wikipedia page is probably how ponzi schemes toppled the Albanian government and led to civil war.
Posted on 6/2/22 at 6:25 am to tigerforever7
More than likely your profits will be clawed back by the SEC when the ponzu scheme is discovered so it can make investors whole who lost
Posted on 6/2/22 at 10:44 am to tigerforever7
If you don’t pay the tax then it’ll illegally gotten and you’ll possibly be subject to a clawback from those that lost money
Posted on 6/2/22 at 11:13 am to tigerforever7
quote:
How does the IRS not realize there was actually no capital gain..?
How would they know? You, as an individual investor, invested a sum of money, then you exited that investment with that sum, plus a profit. That profit is taxable. You, not knowing there was fraud , are just as blind as the IRS, bc the financial documents you received are the same ones you turned in to the IRS.
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