Stock Options Phantom Income

O que deve Trump Do8212Tuas perguntas respondidas Esta será uma carta mais curta, de acordo com a necessidade de diversão e relaxamento de férias. No entanto, na semana passada, uma carta com meus pensamentos sobre o que o Trump deveria gerar mais respostas do que qualquer outra carta tinha nos últimos 17 anos. Como você pode suspeitar, com um tema tão controverso, nem todos concordaram comigo. Mas houve muitas boas perguntas e comentários e alguns desentendimentos pensativos, então eu quero abordar alguns deles. E eu abordarei especificamente por que aparentemente me desvio dos princípios conservadores fundamentais em relação aos impostos. Itrsquos tudo sobre dívidas e as consequências da dívida que é o principal fator para mim. E Irsquoll tenta fazer o caso de que há momentos em que apenas temos que fazer escolhas difíceis, mesmo filosoficamente desagradáveis. Alguns comentários vou extrair outros que caracterizarei em termos gerais e, quando apropriado, Irsquoll copiar e colar comentários inteiros. Então letrsquos entrar. Por favor, explique a taxa adicional do imposto corporativo de 15 em renda acima de 100.000 sem período de dedução. Parece um imposto de 15 sobre as vendas. O que você quer dizer que não há deduções. As deduções de despesas operacionais, Allen, esta foi provavelmente a pergunta mais solicitada e, como você pediu de forma mais concisa, você obteve o reconhecimento por isso. Não, isso não é um imposto sobre vendas. É um imposto de 15 sobre o rendimento das empresas. Essa é uma receita contábil GAAP normal. Há algo como 3.400 diferentes, legais, comgressivo obrigatório fiscalização das empresas lacunas e deduções. (Eu posso encontrar o número exato no momento.) Muitas dessas lacunas fiscais se aplicam a uma única empresa ou a uma indústria muito pequena e são favores de um deputado ou senador aos seus principais constituintes. Então, quando eu não digo deduções, quero dizer livrar-se de cada uma dessas lacunas. Eu sei, sei que ndash estarei engolindo praticamente todos os boi de negócios de alguma maneira ou de outra forma. E isso é o problema: muitas pessoas pensam que sua indústria merece alguns intervalos e uma pequena lacuna não é um grande negócio, e a próxima coisa que você conhece há 3400 desses cachorros. E, em seguida, você encontra a General Electric pagando menos imposto de renda do que eu, enquanto faz vários bilhões de dólares por ano. Eu posso ficar sem o Texas, porque isso provavelmente significaria também diminuir o subsídio de redução de óleo. A depreciação normal ainda se aplicaria. Para aqueles que estão preocupados com as despesas de RampD, eu permitirei uma depreciação acelerada no RampD, porque essas são verdadeiramente despesas, pelo menos em minha mente. Mas o ponto aqui é ter as poucas lacunas possíveis (com as únicas exceções para ser as que claramente, criar diretamente empregos). Eu admitirei facilmente não ser um especialista em contabilidade, mas eu olhei alguns balanços. As empresas deveriam pagar impostos sobre o que eles relatam aos seus acionistas ou seus banqueiros ou mesmo a si próprios. Quinze por cento não são tão grandes como um acordo no grande esquema das coisas. Na verdade, é um pouco menor do que a taxa efetiva atual (dependendo de qual fonte você vá). Eu acho que, sob este plano, nós realmente adotaríamos mais impostos porque veríamos corporações de todo o mundo e domicílio aqui nos Estados Unidos. E as empresas não teriam um tamanho tão drástico para evitar a receita de relatórios, de modo que os impostos corporativos totais aumentariam. O IVA é um obstáculo para o ndash de crescimento no ndash do Reino Unido e da UE, bem como difícil para o grupo mais infeliz em todas as nossas economias. Este imposto insidioso é uma admissão do fracasso por políticos que prometem reduções no imposto sobre o rendimento em troca de propor um imposto direto de ldquofairerrdquo em vez de controlar promessas populistas inabordáveis. Glen, eu concordo totalmente com você: um IVA será um obstáculo para o crescimento. Houve um grande empurrão de muitos leitores sobre o conceito de IVA. Então letrsquos usa sua pergunta como um trampolim para o assunto. Primeiro, se você me perguntou, há 10 anos, se eu pensasse sempre em um IVA nos EUA, eu wouldntquove disse, ldquoNot não, mas não. Double hell nordquo Nós ainda estávamos em um ponto em 2006, onde poderíamos ter controlado o orçamento, nos ajudamos com os problemas de direito, gastos planejados ao longo das linhas de ClintonGingrich e lidamos com o déficit e a dívida. No entanto, não é isso que escolhemos fazer. E agora nos encontramos entre o diabo eo mar azul profundo. O diabo é a dívida nacional, e o mar azul profundo é a crise em que estamos navegando se não percebemos o que fazer com essa dívida. O gráfico abaixo passa em 2014 e, se fosse estendido até o final deste ano, mostraria dívida nacional em 20 trilhões. Em algum momento, Glen, a dívida por si só é um obstáculo ao crescimento em relação à renda. A literatura econômica é bastante consistente sobre isso. Um índice dívida / PIB de 40 não é uma questão, mas as entidades governamentais dos EUA devem um total de 23 trilhões, ou mais de 120 do ndash dívida / PIB e esse montante está aumentando a cada ano. Parecemos muito mais a Itália do que qualquer um de nós gostaria de contemplar. Embora eu concorde que um IVA é um obstáculo para o crescimento, esse não é o problema na Europa. É sua dívida, além de seus sistemas regulatórios escleróticos e montes impiedosos de regras e regulamentos que estão destruindo empregos e impedindo que novas pequenas empresas comecem. Enquanto eu continuo pregando, quando (não se) tivemos a próxima recessão, o balão será de mais de 1,5 trilhão e provavelmente mais perto de 2 trilhões. Não ganhou muito tempo para chegar a trilhões e, em seguida, wersquoll gastará 600ndash800 bilhões de dinheiro dos contribuintes apenas para pagar o interesse pelo que eu acho que serão taxas normais. Agora, se você preferir usar as taxas de juros projetadas da CBOrsquos, então adicione mais 300 bilhões por ano, empurrando os gastos com juros totais para 1 trilhão por ano. (O CBO está assumindo uma economia muito mais forte do que eu seria nesse nível de dívida. Se eu estiver errado, então os pagamentos de juros serão muito mais elevados). Nós acumulamos bem mais de 120 trilhões em passivos não financiados e se nós não conseguimos nosso direito Passando sob controle, a dívida só vai piorar ainda mais pior. Essa realidade traz a próxima questão generalizada. Você precisa saber quando dobrar o rsquoEm John, você sabe que a única maneira real de resolver a crise é cortar gastos em todo o quadro. Corte tudo. Você tem que cortar direitos e despesas de defesa e se livrar de departamentos governamentais inteiros. Temos que aprender a viver dentro do nosso orçamento. Pare de ser parte do mainstream e lide com o problema real: muito gasto do governo. (E também houve a variação do Libertário sobre esse tema: fome da besta donrsquot alimentá-lo. Para todos aqueles que expressaram sentimentos nesse sentido: eu entendi. Eu concordo com você. Se estivesse no meu poder, eu faria isso. Mas Itrsquos não. Therersquos uma música percorrendo minha mente agora. Itrsquos o coro da música clássica de Kenny Rogersrsquo, ldquo The Gambler rdquo: ldquo Você soube quando aguentar rsquoem, sabe quando dobrar rsquoemhelliprdquo Filosoficamente, eu ainda sou tão pequeno, Cara de governo, quando eu estava de volta aos anos 80. Um pequeno libertário. Eu quero que o governo faça apenas o que é necessário para manter o jogo justo, faça as coisas que precisamos fazer como um grupo, o que pode ser feito principalmente no Ndash de nível local e por causa de Godrsquos, mantenha o polegar fora das escalas. Lutamos contra essas batalhas nos rsquo80 e rsquo90s e fizemos um grande progresso ndash e realmente perdemos a nível nacional quando os republicanos assumiram Bush II. Nós, republicanos, nos tornamos a festa Do grande governo. E, enquanto você pode fazer com que muitos Milenários e Gen Xers concordem com o princípio de um pequeno governo, para eles que não inclui acabar com os cuidados de saúde assistidos pelo governo, o que, por definição, significa um governo bastante grande. E donrsquot até tenta tocar o terceiro trilho quente da Segurança Social. Bush II realmente tentou lidar, apenas marginalmente, com problemas relativamente simples com a Segurança Social e foi abatido por ambas as partes. Diga aos Boomers e outros que eles não podem ter seu Medicare ou seus outros ldquoentitlementsrdquo. O fato é que a maioria dos eleitores neste país quer segurança social e cuidados de saúde e espera que os cuidados de saúde sejam prestados para aqueles que não podem pagar. Eles querem condições pré-existentes para serem ignoradas pelas seguradoras. E uma série de outras coisas. Eu acredito que existe uma maneira de controlar os gastos de saúde e colocar nossos problemas de direito em um caminho de planejamento para ser resolvido, mesmo que reconheçamos plenamente que nossos dados demográficos estão trabalhando contra nós. Mas não há como fazê-lo sem dinheiro. Vai levar uma grande quantidade de gastos do governo, não importa como você o corte. O governo tem apenas três fontes de receita: impostos, empréstimos e monetização. O dinheiro de empréstimos corre para cima da dívida, e estamos chegando muito perto do ponto em que a dívida em expansão torna-se debilitante. Mais sobre a monetização mais tarde. Isso significa que temos de aumentar de alguma forma as receitas se pagarmos por tudo o que precisamos de gastos e reduzir a dívida. Não gosto disso, mas esses são apenas os fatos. Então, chegamos ao cerne da questão: como elevamos a receita necessária de uma maneira que ainda nos permita crescer a economia tanto quanto possível, acho que a preponderância da literatura econômica sugere que os impostos sobre o consumo são em geral menos de Um aumento do crescimento do que os impostos sobre o rendimento. As taxas de consumo incluem impostos sobre o valor acrescentado (IVA) e impostos sobre vendas. Depois, há toda uma escola de pensamento construída em torno do chamado Fair Tax, que é um imposto de vendas nacional que seria adicionado a todas as vendas de varejo, além de impostos de vendas do estado. Os defensores do Fair Tax, então, eliminariam todos os impostos federais sobre o rendimento (incluindo o imposto mínimo alternativo, imposto sobre o rendimento das pessoas colectivas e impostos sobre ganhos de capital), impostos sobre a folha de pagamento (incluindo impostos sobre Segurança Social e Medicare), impostos sobre os presentes e impostos sobre o património. Eu posso seguir esse esquema em princípio, mas na prática eu acho que o equivalente a um imposto de 30 vendas (que é o que o imposto justo representaria quando combinado com impostos estaduais e locais de vendas) enviaria muita economia subterrânea. Apenas minha opinião. Quando você pode lidar com o seu encanador ou restaurante favorito por 30 menos pagando dinheiro, a tentação é bastante grande. Irsquove viajou por todo o mundo, e aqueles países com altos impostos de varejo ou taxas de câmbio controladas acabam se tornando sociedades de caixa na medida do possível. Os argentinos e os gregos e os italianos são grandes mestres da vida para sobreviver a uma economia desse tipo. Ligue-me cínico, mas às 30, acho que muitos dos meus vizinhos dominariam rapidamente o jogo também. Um IVA, ou qualquer uma de suas irmãs, tem a vantagem de ser tributado no nível comercial sobre o valor incremental adicionado aos produtos em cada estágio de produção. É, portanto, um grande negócio mais difícil de evitar, então todos pagam. Ou quase todos. Na verdade, seria capturar uma grande parte da atual economia subterrânea. Então, por que não fazer o IVA grande o suficiente para se livrar de todos os outros impostos, como as pessoas do Fair Tax sugerem. Para mim, itrsquos é uma decisão puramente política. O IVA é um imposto regressivo. Isso significa que, geralmente, cai mais fortemente sobre aqueles com rendimentos mais baixos. E progressistas e liberais odiarão isso. Então, temos que criar um compromisso. Isso significa que a Wersquore ainda terá que ter um imposto de renda, mas precisamos que seja tão baixo quanto possível. Minha sugestão é de 20 em todas as receitas acima de 100.000. (Veja o último weekrsquos TFTF para detalhes.) Para tornar o IVA menos de um imposto regressivo, proponho que o tornemos suficientemente grande para que possamos eliminar o imposto da Segurança Social. Isso dá imediatamente a todos os ganhadores de renda mais baixa um aumento de 6 salários. Além disso, reduz os custos comerciais 6. Isso tira muito da natureza regressiva do IVA. Não começar a pagar o imposto de renda até que você limpe 100.000 e não seja tributado para a Segurança Social não significa que aqueles que fazem entre 50.000 e 100.000 donrsquot pagam impostos. Eles pagam impostos sob a forma de IVA, além de seus impostos locais, de modo que sua carga tributária não deve ser muito diferente do que é agora, e eles podem até ver algo de corte de impostos. Lembre-se, o objeto aqui não é apenas reduzir impostos, mas descobrir como obter mais receita tributária com a menor dor possível para a economia global. Se a sua família já foi confrontada (como a minha tem em várias ocasiões) com um aumento significativo nas despesas ou diminuição da renda, você sabe que você teve que fazer algumas escolhas difíceis. A nível nacional, também vai ter que pagar mais, e alguém vai ter menos. Lembro-me de que, quando eu estava começando no negócio na minha década de 30, houve dias em que eu brincava mal, ldquoIrsquoll pague o que eu tenho que fazer, e todos os outros terão que esperar. rdquo Isso incluiu minha esposa e filhos e o que eles queriam ou mesmo necessário. Realityrsquos uma puta às vezes. Nós temos uma realidade para enfrentar até agora. E esse é o nosso processo político nacional. Temos de descobrir onde obter o dinheiro para pagar o que nossos cidadãos dizem que querem. Se um presidente e um Congresso republicano não promulgarem legislação que dê aos eleitores algo que se aproxime do que eles sentem que precisam, os republicanos serão expulsos e os democratas receberão outra chance. Deixe-me dizer-lhe de forma direta que os economistas que aconselham os democratas não só nos darão um IVA, eles nos darão altos impostos progressivos sobre o rendimento pessoal, e o imposto sobre as sociedades não vai diminuir tanto. Eles simplesmente não conseguem comprar minha visão econômica do mundo. Eles são neo-keynesianos através e através. Pense a Europa nos esteróides hellip, mesmo quando observamos a Europa se preparar para implodir nos próximos quatro anos. Há uma série de objeções ao longo das linhas de, ldquo Se fizermos o que você propõe, isso vai me machucar. Itrsquos not fair. rdquo Bem, em muitos casos eu concordo e simpatizo com você. Mas neste momento do jogo, toda a nossa situação política e econômica é ldquonot fairrdquo e wersquore deixados com escolhas apenas difíceis (mas necessárias). Uma objeção especialmente pungente veio de um leitor que havia convertido todo o seu plano de pensão em um Roth IRA, pagou seus impostos, e agora eu estava, propondo um IVA que o faria pagar seus impostos novamente. Ele está certo de que isso é injusto para ele. Mas eu não sei saber o que fazer. Simplesmente não é possível criar um sistema que seja justo para todos em todos os sentidos. Temos que tomar algumas decisões difíceis. As necessidades dos muitos devem superar as necessidades de poucos. E eu digo isso com um entendimento completo que, como Ayn ​​Rand descobriu e explicou. As necessidades do indivíduo são o que dão origem à necessidade e a possibilidade de julgamentos de valor para começar. Esse é o problema de tomar decisões em um governo tão grande e complexo quanto o sistema dos EUA. Nós deixamos seu crescimento ficar fora de controle, e voltar para trás seria tão incrivelmente perturbador em termos de vidas e fortunas e empregos e futuros que a viagem inversa simplesmente não é possível. Nós não conseguimos rebobinar o relógio. Como The Gambler nos disse, ldquoEvery handrsquos um vencedor e cada handrsquos um perdedor. rdquo Nós fomos tratados a mão que temos, e temos que descobrir como jogá-lo para torná-lo uma mão vencedora. Folding não é uma opção. O que acontece se nós não conseguimos equilibrar o orçamento e, portanto, chegamos ao cerne da questão em relação à minha proposta de IVA. Se nós não conseguimos trazer o déficit orçamentário abaixo da taxa de crescimento nominal do PIB (o que é improvável que vá acima de 4 no futuro próximo), nossa dívida explodirá durante as recessões e, em última análise, enfrentaremos uma crise da dívida. Aqueles nunca terminam bem. As escolhas que teremos nesse ponto serão muito menores e ainda mais rígidas. Letrsquos vaga a nossa situação por alguns minutos. O que acontecerá se aumentarmos os impostos e reduzindo os gastos o suficiente para que o déficit e a dívida estejam sob controle. Como chegar, haverá compromissos ao longo do que Clinton e Gingrich fizeram, mas espero realmente que a Wersquore seja capaz deles. Com a nossa dívida tão grande como é, vamos estar em uma economia um pouco mais lenta, mas se nos livrarmos de grilhões suficientes de crescimento e obter a estrutura de incentivo com a combinação fiscal adequada, o empresário americano provavelmente pode nos obter Fora do furo wersquore sem que ele fique muito mais profundo. Com as incríveis novas tecnologias que estão chegando, provavelmente podemos chegar a um ponto em que, de fato, podemos superar o nosso problema de dívida nos próximos 10 a 15 anos. O que acontece se não formos o resultado mais benigno é que acabamos parecendo o Japão. Crescemos a dívida até o ponto em que realmente temos que monetizá-lo. Talvez não seja o fim do mundo, mas certamente não é a máquina de criação de emprego de alto crescimento que gostaríamos que a nossa economia fosse. A renda e a divisão da riqueza se aprofundariam, e se você acha que houve uma recusa nas últimas eleições, basta aguardar. Podemos ver impostos ainda mais altos e uma economia e empreendedores de crescimento mais lento, empresas estabelecidas e investidores teriam apenas maiores dores de cabeça. Lembre-se, thatrsquos o melhor resultado possível, se não abordarmos nosso déficit e dívida. O que acontece com o valor do dólar nesse cenário Seis anos atrás, eu teria confiado que você iria descer. Agora, enquanto observo a experiência japonesa (e mesmo que eu reconheça uma série de diferenças entre nossas economias), eu suspeito que o dólar poderia subir, não cair. Ou melhor, não iria cair em relação às outras moedas mundiais, e não quase tanto quanto os meus amigos de dinheiro duro parecem pensar. Nós realmente nos encontraríamos em um mundo para o qual não temos análises históricas. Se o país com a moeda de reserva do worldrsquos começa a imprimir dinheiro apenas para atender a sua dívida porque as pessoas não adquirem sua dívida e em um mundo onde a maioria das outras economias principais também estão em problemas (como eu suponho logicamente que sim), então, onde estamos? E lembre-se, este seria um futuro em que a dívida global global seria no alcance de 500 trilhões e o PIB global seria de 100 trilhões. Monetizando 1ndash2 trilhões por ano (estamos falando 10 anos fora) ndash aproximadamente o equivalente ao que o Japão está fazendo hoje ndash pode ser como cuspir no oceano. O dinheiro será muito mais fungível e líquido e móvel no mundo das tecnologias financeiras que estamos evoluindo. Seria o auge da arrogância pensar que podemos saber com qualquer grau de certeza o que aconteceria. Agora eu não acho que o cenário de falha de ação acontecerá, mas wersquore no modo wargame, então devemos pensar o impensável. Talvez o mundo decida que quer outra moeda de reserva ou substitui algo novo. Nós não sabemos. Muitas coisas serão possíveis em 10 anos, que hoje não temos nenhuma pista. Em tal cenário, o dólar poderia de fato perder uma grande parte do seu poder de compra. Isso criaria uma grande incerteza e volatilidade, e eu vejo um cenário global de dívida deflacionária que se desenrola, seguido de uma enorme criação monetária. Eu acho que o fator crítico para mim é que não vejo nenhum cenário em que não lidamos com o déficit e a dívida e que possamos obter um resultado positivo. Itrsquos uma escolha binária para mim. Então, eu escolho sugerir o que eu acho que é a única coisa politicamente possível a fazer e é reestruturar o código tributário, equilibrar o orçamento com um aumento na tributação, reverter tantas regras e regulamentos quanto possível, espero que possamos obter os cuidados de saúde Emita ndash direito e depois veja o que acontece. Deixe-me terminar com uma história. Eu estava em um avião indo de Nova York para as Bermudas e tive a sorte de ser atualizado para a primeira classe. Foi 1998 ndash apenas alguns dias após a resolução da crise de Long-Term Capital Management. Os mercados tinham visto um tempo bastante difícil. O cavalheiro que estava sentado ao meu lado encomendou Scotch assim que as rodas estavam voltadas e, basicamente, indicaram à aeromoça para mantê-los próximos. Você conseguiu ver que ele estava emocionalmente abalado. Eu o negociei depois de algumas bebidas, e quando descobriu que eu estava aliado com o negócio de hedge funds e vindo de Nova York, ele assumiu que eu sabia muito mais sobre o mundo do que eu. Acontece que ele era vice-presidente de um dos maiores conglomerados bancários da época. Todos conhecemos o nome. Ele começou a se relacionar com a profunda história de fundo sobre o que aconteceu nas últimas semanas, culminando na famosa reunião convocada pela Reserva Federal de Nova York, onde o presidente do Fed de Nova York disse a todos na sala que jogassem bem Na caixa de areia. E para chicotear seus talões de cheques. Este cavalheiro esteve na reunião e conheceu toda a história. Eu sabia que estava ouvindo algo especial, então eu apenas sentei e ouvi e me assegurei de que o comissário de bordo continuasse trazendo Scotches para ele. Ele pareceu abrir mais com a queda de cada um. Finalmente, ele se virou e me olhou nos olhos e disse: ldquoSon, fomos ao limite do abismo, e nós olhamos. E foi um longo caminho para baixo. Isso assustou cada um de nós até as profundezas da nossa alma. Então, ele ordenou outro escocês e recuou a cabeça e tentou descansar. Enquanto eu olho para trás naquela crise de 1998, que todos nós pensamos ser tão grande na época, traz um sorriso. Estávamos falando centenas de milhões que precisavam ser discutidos por cada um dos grandes bancos, vários bilhões de dólares em total. Foi gerenciável dentro do sistema privado. Apenas 10 anos depois, na crise de 2008 desencadeada pela bolha imobiliária, conversamos centenas de bilhões, se não trilhões de perdas, e o sistema privado não era capaz de lidar com isso. Se nós não lidamos com o nosso problema de dívida, a crise em que o mergulho de Wersquoll irá resolver a dívida de uma forma ou outra ndash e a turbulência subseqüente fará com que 2008 pareça tão insignificante como o de 1998. Eu não quero que meus filhos se levantem em um mundo em que estamos renegados até a beira do abismo e forçados a olhar por cima. Ainda temos a oportunidade de garantir o futuro para nossos filhos, mas apenas se aproveitarmos o momento. Se nós não devemos, será um insucesso divertido para todos. Alguns pensamentos sobre investir em um ambiente como este (uma vez que investir na economia é supostamente sobre o qual esta carta é sobretudo). Com todos os desafios atuais e emergentes que enfrentamos, o investimento ainda será difícil mesmo se lidarmos com nossa questão da dívida, mas esses desafios serão muito mais agradáveis ​​do que as escolhas extraordinariamente difíceis que wersquoll deve ter se não forçarmos a dívida. Com as ferramentas e estratégias que temos para nós hoje e com ferramentas ainda mais poderosas sendo desenvolvidas para o futuro, acho que os investidores que estão devidamente preparados podem descobrir o que fazer em ambos os cenários. Mas os investidores médios que esperam que o futuro pareçam um pouco como o passado que a Wersquore vai ser gravemente danificada. Seus futuros de aposentadoria serão arrancados deles. E eles vão ficar profundamente infelizes. Nada disso deve ser, é claro. As coisas podem acabar bem. Mas eu tenho uma forte suspeita de que o movimento maciço que estamos vendo de gestão ativa para estratégias de gerenciamento passivo no ano passado vai se tornar uma das piores decisões de todos os tempos pelo rebanho. Mas isso é um tópico para outra carta. Estava realmente triste por aprender esta semana que meu velho amigo Howard Ruff faleceu. Ele tinha 85 anos e sofria de Parkinsonrsquos. Howard Ruff é um nome que os meus leitores mais novos (menores de 40 anos) provavelmente não reconhecerão, mas aqueles de nós que estavam por perto para o mundo do investimento dos rsquo70s e rsquo80s certamente foram influenciados por Howard. Ele foi um dos verdadeiros fundadores do mundo da publicação de investimentos e foi claramente a estrela do rock nas rsquo70s e rsquo80s. Seu boletim principal foi chamado Ruff Times. Este título era apropriado, pois seus três primeiros livros eram Famine and Survival in America (1974), How to Prosper durante os Bad Years (1979 ndash NYT 1), e Survive and Win in the Inflationary Eighties (1981) ndash all solidly in O campo da escuridão e doom. Howard acreditava (a partir de seus escritos de 1979 e 1981) que os Estados Unidos estavam indo para uma depressão econômica hiperinflacionária e que havia um perigo de que tanto o governo quanto os planos de previdência privada estivessem prestes a entrar em colapso. Sua lista de endereços cresceu para mais de 200.000 assinantes (inédito para uma newsletter no momento), e ele teve um seguimento que foi incrível. Ele fazia parte da multidão de dinheiro duro e montou a onda de armazenamento de ouro e alimentos, preparação para a próxima crise, ao longo dos rsquo70s e nas rsquo80s. Ele fez uma série de chamadas notáveis, e as pessoas pensaram que ele sabia do que estava falando. Eu acho que, às vezes, mesmo o próprio Howard. (Você pode ler uma reminiscência mais completa pelo nosso amigo comum Mark Skousen aqui. (Também inclui um link para uma peça do New York Times sobre Howard.) Lembro-me da primeira vez que o vi. Eu estava em uma conferência de investimentos em Nova Orleans (o Ldquogold conferenciou-se que, no seu apogeu, teria 4.000 participantes e foi fundada por outra lenda, Jim Blanchard), e notei uma pequena multidão (mais de 100 pessoas) focada em um indivíduo em um corredor. Howard estava atento ao tribunal, respondendo a perguntas, Apenas sendo o seu eu divertido. E as pessoas se inclinando para ouvir ndash enraptured. Eu vi essa cena repetida em outras ocasiões durante aquela e outras conferências, durante todo os anos 80. E então as coisas mudaram. Os mercados mudaram, e a mensagem de Howardrsquos didnrsquot. Seu assinante A lista começou a encolher. As multidões ficaram menores (e mais velhas). Você deve entender, Howard era um homem complicado. Ele passou por várias falências e voltou a ganhar milhões. Ele estava apaixonada por tudo o que ele fez. Os recuos da empresa eram simplesmente oportunidades para avançar para outra coisa. Para frente e para cima. Ele sempre foi otimista. Ele era um mórmon devoto que tinha 14 filhos, 79 netos e 48 bisnetos no momento da sua morte. Em algum momento, no meio da última década, eu estava falando em uma conferência de investimentos em Las Vegas. Howard me ligou e perguntou se ele poderia descer de onde ele morava no sul de Utah para me dar uma cópia de seu novo livro (que ele queria que eu revisasse). Vocês podem dizer uma força da natureza não, então eu disse a ele para descer. Concordamos em nos encontrar em um estande no chão da exposição à tarde. O chão estava bastante ocupado, e conversava com amigos e participantes na parte de trás do corredor. Olhei para o corredor e vi Howard andando em minha direção, e não estava até chegar a cerca de 10 metros de mim, percebi que ninguém o impedira de conversar. Howard ainda era a mesma pessoa, mas o mundo seguiu em frente, e ele não se mudou para isso. Lembro-me vividamente de pensar sic trânsito gloria. Essa lição, o pensamento de que isso poderia acontecer com qualquer um, foi gravado no meu cérebro nos últimos 10 anos. Ele escreveu uma biografia em que ele falou sobre seus sucessos e fracassos, e comparamos notas sobre sua carreira e as mias de vez em quando quando tivemos oportunidades de nos reunir. Eu tinha pulado perto do início do negócio de publicação de investimentos, mas no lado da gestão, e eu não comecei a escrever realmente o meu próprio material até o fim da década. Howard estava feliz em me orientar e falar livremente sobre seus altos e baixos. Ele compartilhou o que ele considerou ser seu maior erro. No início da década de 80, e certamente até meados da década de 80, ele começou a perceber que a inflação realmente não estava voltando e que o ouro poderia ser desafiado. Mas ele tinha mais de 100 funcionários e uma base de assinantes que se rebelaria se mudasse sua melodia. Alterar sua mensagem significava que ele teria que demitir uma série de pessoas, incluindo muitos amigos e familiares, e ele simplesmente não conseguiu fazer isso. Eu sabia disso, no meu coração, mas eu simplesmente não conseguia prejudicar a empresa tão mal. rdquo Tivemos essa conversa várias vezes. Tive a vantagem única de ser amigo de vários escritores e editores nos últimos 35 anos. Irsquove viu escritores grandes e depois desaparecem. Outros aparentemente ficam no topo de seu jogo, andando na onda onde quer que seja necessário. O maior erro que leva a baixas é acreditar em sua própria magia de investimento (ou, como costumamos dizer no Texas, acreditando sua própria besteira). Howard era um verdadeiro e único gênio de marketing e, se ele tivesse mudado de música quando soubesse que ele precisava, ele perderia a metade dos seus leitores, mas ele teria construído sua lista de volta. A lição: seja fiel ao que você conhece e acredite, e deixe as fichas cair onde elas podem. Donrsquot diz às pessoas o que eles querem ouvir, Howard diria, mas o que você realmente pensa. Apenas certifique-se de acreditar. Howard era amigo de todos os que conhecia, sempre generoso com seu tempo e recursos. Aqueles de nós no mercado de publicação de investimentos devem uma grande dívida, seja ela conhecida ou não, para Howard Ruff. Seu negócio de publicação possui DNA Howardrsquos enterrado profundamente dentro dele. Que ele descanse em paz. Washington DC, Nova York, Atlanta e Flórida Eu raramente pedi aos meus leitores para me conectar com alguém, mas quando eu tenho, eu nunca consegui obter esse endereço de e-mail ou número de telefone. Então, com essa esperança em mente, alguém poderia me dar email ou conexões telefônicas tanto para Matt Ridley quanto para Bill Gross. Você pode enviá-los para mary2000wave. Obrigado. Semana após a próxima, irei para Washington DC e Nova York para uma série de reuniões e, em seguida, para Atlanta para uma reunião do Conselho da Galectin Therapeutics. Então, Irsquoll esteja em casa para os feriados. Irsquoll estará na Flórida para a Inside ETFs Conference em Hollywood, Flórida, 22 de janeiro de 25. E então Irsquoll esteja no Orlando Money Show em 8 de fevereiro no Omni, em Orlando. O registro é gratuito. Itrsquos hora de acertar o botão de envio. Depois de escrever conteúdo tão dramático e emocional, acho que Irsquoll vai assistir ao último filme de Harry Potter e simplesmente se divertir. Ainda estou totalmente espantado que eu possa ganhar a vida fazendo o que eu gosto de escrever ndash e pensar e falar. Toda vez que eu me sento neste computador para escrever minha carta, eu realmente penso: ldquoDear God, donrsquot deixe a magia parar esta semana. rdquo Mas então a verdadeira magia é você. Itrsquos tem 17 anos e ainda aproveito cada passo de nossa jornada juntos. Obrigado. Lembre-se, eu realmente leio seus comentários e leve-os ao coração. Então, se você quiser me dizer algo, vá em frente. Enquanto isso, você tem uma ótima semana. Será interessante ver como Trump transita do showman para o presidente, de um candidato que pode dizer qualquer coisa para ldquoOh, meu Deus, eu tenho que tomar decisões, e este é o mundo real. rdquo Talvez Irsquom pedindo o triunfo da esperança, mas eu Acredito que pode. Seu analista de memento mori sussurrante, obtenha uma visão de olho de pássaro da economia com John Mauldins Pensamentos da linha de frente Este boletim de notícias popular do famoso comentarista econômico, John Mauldin, é uma leitura obrigatória para investidores informados que querem ir além da mídia convencional Hype e descubra as tendências e armadilhas a serem observadas. Join hundreds of thousands of fans worldwide, as John uncovers macroeconomic truths in Thoughts from the Frontline . Get it free in your inbox every Monday. Steve Althaus Dec. 7, 2016, 10:44 p. m. Hello, John, I applaud your recognition that it is time to make major changes to the tax code and to reduce spending in order to address our debt. But, I fear the suggestions you make will only make the situation worse, in the long run, not better. You have often said that as a nation we must come to grips with how much we want to spend on health care. In the Thoughts from the Frontline - What Should Trump Do letter you stated The simple fact is, a majority of the voters in this country want Social Security and healthcare and expect healthcare to be provided to those who cant afford it. They want pre-existing conditions to be ignored by insurers. And a whole slew of other things. My largest concern is that those voters you mention and the nation as a whole that needs to have a discussion of how much of these things we want have no idea of what the cost to them is. It is an undeniable fact that human beings, when asked how much of an item that they perceive as valuable to them they would like to have, if they also perceive that there is no cost to them for that item, will always answer, As much as I can get. Reduce the perceived cost of a perceived valuable item to zero and demand becomes unlimited. I agree that the addition of a VAT will be able to generate large tax revenues. BUT, that tax is invisible to nearly all voters. Companies do not pay tax, they only collect it. They get it by increasing prices, reducing dividends, laying people off, or using cheaper suppliers, andor increasing productivity. The point is that people who have earned money pay those corporate taxes, one way or the other. But, the vast majority of voters have no concept of where those costs are coming from, even if the costs are coming out of their own pockets. One of the primary purposes of the withholding scheme for income tax that was instituted in 1913, abolished because of public outcry in 1917, and finally, permanently reinstituted in 1943, is to hide from the tax payer, how much he is actually paying. It is much clearer to him what he is paying if he writes a check for the total he owes. If, by continuing to make it impossible or difficult for the average voter to understand the cost of the benefits you pointed out that they expect, they will only ask for more. And after the changes you propose, the long line of politicians that got us into this mess, will be only too happy to double down on the mess by using the additional source of revenue presented by the VAT, and by being able to continue to abuse the income tax system by raising rates and re-instituting their power base by granting again those exemptions you propose to eliminate. Adding to the problem, for the average voter, there is no perceived debt problem. There have been no observable negative consequences to him for the largeness of the debt, or its rate of increase. To the average voter, it really does seem to be a free lunch. Politicians also perceive it as such. If we were blessed with a responsible Congress and an informed electorate, we would not likely be in the mess we are in. But we dont, and we are in a mess, and I greatly fear that the system you propose will do nothing to correct the irresponsibility or the ignorance, but will give the irresponsible even more tools to spend even more money with no negative consequences to them. This is why I strongly prefer the FairTax approach. You mentioned a couple of areas of concern with the FairTax. One, being that when people are confronted with a 30 total burden of national, state, and local sales tax, they will go to a cash position to avoid it. Second, you mentioned the regressiveness of the FairTax proposal. Just to make sure we are on the same page with respect to definitions, I copied a short summary of the FairTax below. Summary: H. R.25 114th Congress (2015-2016) All Bill Information (Except Text) There is one summary for H. R.25. Bill summaries are authored by CRS. Shown Here: Introduced in House (01062015) FairTax Act of 2015 This bill is a tax reform proposal that imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income and corporate income tax, employment and self-employment taxes, and estate and gift taxes. The rate of the sales tax will be 23 in 2017, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property, for property or services purchased for business, export, or investment purposes, and for state government functions. Under the bill, family members who are lawful U. S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines. The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury. Tax revenues are to be allocated among: (1) the general revenue, (2) the old-age and survivors insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund. No funding is allowed for the operations of the Internal Revenue Service after FY2019. Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this Act. The entire bill is less than 24,000 words, or about 61 pages. It is available at: congress. govbill114th-congresshouse-bill25text In discussing your concerns, I am drawing from two books, The Fair Tax Book and FairTax: The Truth by Boortz and Linder. Boortz and Linder ( BampL) claim that tax avoidance under the FairTax would be less than it is under the current system. Currently they claim that the IRS admits to a 16 tax gap of collecting what they know is owed. But, the IRS claims they have no way of knowing how much they should be collecting from the current underground economy. So, it is not as if the current system is air tight with respect to collecting what is owed. The FairTax system takes two people to cheat. The current system only takes one. And with the FairTax one of the cheaters is a business owner who risks his livelihood to cheat. BampL claim that 0.3 of all companies sell 48.5 of what is sold in the US and 3.6 of all companies (approximately 92,334 companies) make 85.7 of all sales. Their point is that these are large companies who are not likely to risk their business by cheating. They also point out that by looking at companies, instead of looking at individual tax payers, the workload of observation is reduced to about 16 of what it would be if each tax payer needed to be observed. Their conclusion is that the FairTax would suffer less loss from cheating. The regressiveness concern is addressed by the Prebate to all US citizens of the amount of taxes that they would be paying on poverty level expenditures. Of course, the FairTax also includes the elimination of the Social Security tax you mentioned. I think there is real value in people seeing on their receipt every time they spend any money on anything just how much of it went to fund the government. I would prefer that the total funding of government were visible on that receipt. If the amount of the tax causes sticker shock it is accomplishing feedback to voters that perhaps they should rethink the choices they are making and the policies they are supporting. A poorer alternative, assuming the adoption of what you propose, would be to eliminate withholding and print an estimate of the total VAT on each receipt. But, without these feedback mechanisms, the average voter is ignorant of the cost of government, and that ignorance will prevent any meaningful, informed discussion of trade-offs of costs vs services and that ignorance will doom us to never reducing the debt. David Smith 34504 Dec. 7, 2016, 8:14 p. m. Following up on your comments about replacing the FDA, Bloomberg reports that Trumps transition team is considering Jim O8217Neill to head the Food and Drug Administration. In a 2014 speech, Jim O8217Neill said he supported reforming FDA approval rules so that drugs could hit the market after theyve been proven safe, but without any proof that they worked, something he called progressive approval. ONeill is a managing director at Thiels Mithril Capital Management, and served the George W. Bush administration as principal associate deputy secretary at the Department of Health and Human Services. John Mauldin Dec. 2, 2016, 7:10 p. m. Jerry, you are right. There would have to be some way to determine who gets how much or we would just simply say that everybody gets the same upon retirement. very good point. John Ralph Casale Dec. 1, 2016, 7:15 p. m. I8217ve long enjoyed your 8216Thoughts from the Frontline8217 newsletter and have periodically dabbled in some of the other services subscriptions. Thank you for your informative and educational content. I have not had much frequency to drop you a note (once or twice in the past I believe), but did want to comment on the recent letter. I believe you well summarized the challenges and shortfalls of a VAT. I consider a VAT to be just another transactional flow-of-funds tax, not adequately dissimilar from taxing income. Both seek to tap into the velocity of money. I worry that taxes on economic activity create both real and behavioral disincentives directed at the activities we would be better served to encourage. Governments need to be very careful at the margin, and never discourage either 8216earning the next dollar8217, or 8216buying the additional item8217. My opinion is that you are right in presuming this would just create an underground economy. You did not touch on the possibility of a tax on wealth. I understand there are constitutional provisions against asset based taxes, ones somewhat circumvented when the asset is transactional i. e. estate or capital gains taxes. Locally, real estate taxes are the most recognized form of wealth tax. I would enjoy a considered opinion on such options. I see there is a reference (correct) to a 1999 Trump statement that he once considered a wealth tax, though I do not recall this from the recent campaign. cnnALLPOLITICSstories19991109trump. richindex. html An indirect tax on wealth could be as simple as a means test on government benefits like social security and Medicare. I was surprised this election cycle saw very little discussion on either the FICA wage cap or benefit eligibility of such programs. I don8217t want to see the government too heavy in the role of 8216wealth distribution8217, but also believe there should be an anti-aristocracy slant to a democracy one that attempts to favor the capitalistic creation of wealth over the preservation of wealth. Wealth will always lobby in self interest for increased policy that seeks favor or preservation. You also suggested a lowering of the corporate tax. My inclination is to agree with this philosophically, but I worry that it will not spur the growth you expect. I see too many charts like the one below to believe that corporations are currently struggling (in aggregate) or that improving corporate wealth will honestly trickle out to improving economic activity. econdatauswascurcp12.png I do most enjoy economic commentary that is delivered through a behavioral lens, as you often do. It is worth considering what provides the better incentive, a low base tax or a higher base tax with incentives (deductions). The latter makes the tax code more cumbersome, which creates cost (jobs for accountants), but has governmental appeal. As you have past noted, laws can be used to discourage, but the tax code is one of only a few ways a government can attempt to encourage behavior. Moneyed parties will always influence peddle to try and take advantage of that for their own self-interest, but a truly representative government should be able to mitigate such factors for the public good. Rarely do we note that businesses are responsible for most all the taxes, be they income, sales, profits, etc. Would we (as employees) be better served by an additional corporate deduction for income taxes paid on behalf of employees, particularly US employees The creation of a double deduction on US payroll taxes should be no less challenging than the double taxation on dividends that exists today. Thank you for reading, and pardon the multiple asides. Off topic, but I can8217t help but be curious why the government does not do more to encourage non-cash transactions. I8217d love to see you write on the efforts in India right now to limit paper currency. Doesn8217t the inherent 8216traceability8217 of technology like block-chain transactions e. g. bitcoin-like exchanges, make it something governments should encourage and back rather than avoid. It could do much to diminish black market economies, which perhaps is not the issue in the US as other realms, but not absent either. I believe a core tenant of government is that one has to set the institution to a higher standard than will be ever be honestly achieved by the individuals tasked with delivery of that standard. We do that in the US, but perhaps not as well as we once did. I see the over riding role of government as relatively simple step in when 8216tragedy of the commons8217 situations arise and the self interest of the few is detrimental to the populace at large, step aside when self interest is neutral to the populace, and encourage (at least with infrastructure) when self interest benefits the populace. The category is not always immediately obvious, but the standard is clear. A tax code such as we have that favors share buybacks, and thus option holding, over dividends and equity holding strikes me as ridiculous. I wrote on this for The Motley Fool some years back. Patrick Grimes 38293 Nov. 29, 2016, 8:23 a. m. John - thanks for the letter. I8217ve followed you closely for years. You8217ve been very consistent and pragmatic. It seems to me that you are slowly, pushing the alarm button. At 59 years young, I am one of those people who are not sure what to expect over the next ten years for my investments, let8217s just say, I am keeping a lot of powder dry. This comment gave me some pause - 8220And remember, this would be a future in which total global debt would be in the 500 trillion range and global GDP would top 100 trillion. Monetizing 12 trillion a year (we are talking 10 years out) roughly the equivalent of what Japan is doing today Did you know, in ten years, the peak of the baby boom, me and my wife, those born in 1957 and 1958 reach full retirement age Maximum debt with most of the boom retired, UGH mhbplusyahoo. au Nov. 29, 2016, 6:13 a. m. In order to tackle the State and Federal debt, there is one obvious way which, for some reason, is never mentioned - the sale of government assets. If all airports and other state-owned facilities were privatised, the funds generated would play a really significant role in debt reduction - or would fund new infrastructure without the need for future borrowings, The example of Australia, which has privatised many previously State-run enterprises with enormous benefits in both efficiency and funds generation, is well worth studying. William McCarthy Nov. 28, 2016, 8:01 p. m. Great ideas and you spent a great deal of time thinking about solutions. But, John, in jest, you are guilty of rational reality based thinking ( to borrow an admonishment within the Bush Administration to someone who questioned the wisdom of invading Iraq). And, don8217t many societies have VAT8217s and lower corporate tax rates etc. And, yet they still have high deficits and debts. You are fighting human nature or, Bastiat8217s great quote 8220Government (or the State) is the great fiction whereby everyone attempts to live at the expense of everyone else.8221 (I hope I did not torture the quote too badly). I think we will muddle through (to borrow your term), nip and tuck around the edges to buy time (can kicking), 8220reform8221 this and that (Screw someone because we politically can) and pray, pray and pray some more for inflation. No challenges that a good ten years of inflation at 5 would not solve while schlepping CPI inflators on entitlements. And, of course, it will get out of control and we will have to find son of Volcker to fix that problem. Robert Hardcastle Nov. 28, 2016, 2:28 p. m. In all of the budget balancing mania the demographics of Baby Boomers isn8217t fully taken taken into account. The average lifespans of 78 for males and 81 for females is just that, an average. By definition this means that half are deceased before these ages. It is now been actuarialy determined that half of all Baby Boomers will be dead by 2025 or just 9 years from now. Once deceased there will be significantly lesser demand for Medicare, Medicaid, Veterans services, Senior services and Social Security. If your concern is getting to this point, it is understandable, but beyond 2025 demand on the budget will be significantly lessened. Charles DuBois Nov. 28, 2016, 2:19 p. m. John Thanks for all of the hard work. Writing frequently is not easy One important note on 8220deficits and debt8221. I believe you are well-intentioned but misinformed on this topic. For starters, absent self-imposition, a nation with its own free floating currency, no foreign debt and a functioning central bank will not have a 8220financial crisis8221 related to national public debt. For example, Japan has not had, and never will have, such a crisis - absent self-imposition. Second, public sector deficits are private sector surpluses by accounting law. Indeed, public deficits translate almost dollar for dollar into business profits (See Kalecki profit equation in economics). Massive deficits were the reason why profits were strong in 2010-11 despite a still weak economy. Point being 8220be careful what you wish for8221. Future entitlements do present a potential problem but the problem is not 8220financial crisis8221. But until we understand how the monetary system works in the first place, discussions will not be productive. Hope useful. Kindly, Charles DuBois Keynes D. Von Elsner Nov. 28, 2016, 11:02 a. m. I like your thinking and agree with you for the most part. I have 2 concerns. 1. In the Internet Age how do you enforce a VAT Won8217t the wealthy find a way skirt it, so the middle class will bear the burden 2. I think a progressive VAT may be desirable. Why should there be the same level of tax on an inexpensive car as on a BMW or Porsche or Mercedes or on a meal at a 5 star restaurant vs a meal at Mickey D copy 2017 Mauldin Economics. Todos os direitos reservados. Thoughts from the Frontline is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting MauldinEconomics . Any full reproduction of Thoughts from the Frontline is prohibited without express written permission. If you would like to quote brief portions only, please reference MauldinEconomics. keep all links within the portion being used fully active and intact, and include a link to mauldineconomicsimportant-disclosures. You can contact affiliatesmauldineconomics for more information about our content use policy. To subscribe to John Mauldins e-letter, please click here: mauldineconomicssubscribe Thoughts From the Frontline and MauldinEconomics is not an offering for any investment. It represents only the opinions of John Mauldin and those that he interviews. Any views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with, Mauldins other firms. John Mauldin is the Chairman of Mauldin Economics, LLC. He also is the President and registered representative of Mauldin Solutions, LLC, which is an investment advisory firm registered with multiple states, President and registered representative of Millennium Wave Securities, LLC, (MWS) member FINRA and SIPC. through which securities may be offered. MWS is also a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB) and NFA Member. Millennium Wave Investments is a dba of Mauldin Solutions, LLC and MWS LLC. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. O desempenho passado não é indicativo de desempenho futuro. Please make sure to review important disclosures at the end of each article. Mauldin companies may have a marketing relationship with products and services mentioned in this letter for a fee. Note: Joining The Mauldin Circle is not an offering for any investment. It represents only the opinions of John Mauldin and Millennium Wave Investments. It is intended solely for investors who have registered with Millennium Wave Investments and its partners at MauldinCircle (formerly AccreditedInvestor. ws) or directly related websites. The Mauldin Circle may send out material that is provided on a confidential basis, and subscribers to the Mauldin Circle are not to send this letter to anyone other than their professional investment counselors. Investors should discuss any investment with their personal investment counsel. John Mauldin is the President of Mauldin Solutions, LLC, which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS), an FINRA registered broker-dealer. Millennium Wave Investments cooperates in the consulting on and marketing of private and non-private investment offerings with other independent firms such as Altegris Investments Capital Management Group Absolute Return Partners, LLP Fynn Capital Nicola Wealth Management and Plexus Asset Management. Investment offerings recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 13 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisors services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommendmarket, they only recommendmarket products with which they have been able to negotiate fee arrangements. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investors interest in alternative investments, and none is expected to develop. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. John Mauldin andor the staffs may or may not have investments in any funds cited above as well as economic interest. John Mauldin can be reached at 800-829-7273. Follow Mauldin on Recent Articles TFTF ArchivesThe Totality of the Facts and Circumstances Govern Reasonable Prospect of Recovery and Reasonable Certainty Tests. 28 Shifting the Burden of Proof on the Issue of Timing of the Theft Loss Deduction to the Service Under IRC 7491. 34 A Portion of a Loss Determined, With Reasonable Certainty, to be Non-Recoverable Is Deductible Notwithstanding the Existence of Pending Claims or Litigation as to the Remaining Loss. 35 The Defrauded Taxpayer or Theft Victim is Not Required to File Litigation Against the Perpetrator as a Prerequisite to Taking a Theft Loss. 37 The classic Ponzi scheme may soon be renamed the Madoff scheme, simply by virtue of the massive amounts of monies, an estimated 50 billion, invested with Madoff. It is now known that Bernie Madoff, like his famous predecessor, Charles Ponzi, used monies given to him by new investors to pay prior investors promised returns on their earlier investments. Madoff, like Ponzi, and also allegedly like Arthur Nadel and others, robbed Peter to pay Paul. Their massive scams wrongfully deprived thousands of investors of billions of dollars. I. THE SHORTCOMINGS OF CAPITAL LOSS TREATMENT For individual investors, the Internal Revenue Code (IRC) generally treats investment losses as capital losses, deductible only to the extent of 3000 in excess of the capital gain experienced by the taxpayer for the year in question.3 Even though the excess capital loss may be carried forward to later tax years, the deductibility of these losses is still subject to the same limitations. 4 In addition, because a capital gain is only experienced upon the sale or exchange of property (see IRC 1221), capital gains are less likely to be recurring income. Thus, there is the potential that a significant loss suffered by a defrauded investor may never be utilized in the investors lifetime. Theft losses, on the other hand, are not limited in the same manner that capital losses are limited. More importantly, a theft loss can be used by individuals as a deduction against ordinary income such as wages or interest income to the extent that the theft loss is not covered by insurance or otherwise.5 In addition, in Revenue Ruling 2009-9, 2009-14 I. R.B. 735, issued March 17, 2009, the Internal Revenue Service (Service) announced that theft losses resulting from investment transactions are deductible under IRC 165(c)(2) rather than (c)(3). As such, they are not subject to the limitations of IRC 165(h), limiting certain losses to the excess of 100 and 10 of adjusted gross income. Nor, announced the Service, are theft losses resulting from investments subject to the limitations on itemized deductions found in IRC 67 and 68. Ordinary income, of course, is more likely to be recurring, substantial, and taxed at higher marginal rates. Thus, a theft loss deduction that can be deducted against ordinary income can give the victim of a fraudulent investment scheme greater, more immediate relief than can a deduction for a capital loss. But, is it proper under federal income tax law, to treat an investment loss as a theft loss The answer for victims of Ponzi schemes is often yes. For victims of other kinds of investment loss caused by securities fraud or other wrongdoing, theft loss treatment might be available under certain circumstances. II. ESTABLISHING A THEFT UNDER FEDERAL INCOME TAX LAWS The court in Edwards v. Bromberg . 232 F. 2d 107 (5 th Cir. 1956) provided what is the most often-cited definition of theft for purposes of IRC 165, as follows: The word theft is not. a technical word of art with a narrowly defined meaning but is. a word of general and broad connotation, intended to cover. any criminal appropriation of anothers property to the use of the taker, particularly including theft by swindling, false pretenses, and any other form of guile . The exact nature of the crime. is of little importance so long as it amounts to theft.6 The broad approach of the Bromberg court to the definition of theft is reflected in the Treasury Regulations promulgated under IRC 165, deeming theft to include, but not be limited to, larceny, embezzlement, and robbery.7 Whether a theft has occurred depends upon the law of the jurisdiction where the loss was sustained.8 Either state or federal law can provide the requisite basis for establishing a theft loss to the extent applicable to the conduct at issue in the jurisdiction where the theft occurred. And the record before us establishes that Livingstones fraud in obtaining money from petitioners brings this case within the applicable Florida criminal statute in respect of obtaining money by false representations or pretense, Fla. Stat. sec. 811.021(s), as well as within the provisions of the United States Code which makes it a crime to use the mails to defraud, 18 U. S.C. sec. 1341. The crime under either Florida or Federal law was a theft within section 165 of the Internal Revenue Code .9 Furthermore, it is unnecessary that the perpetrator of the theft be convicted or even charged with theft.10 Examples of Conduct Giving Rise to Theft for Purposes of IRC 165. The Bromberg Courts inclusion of any other form of guile within the ambit of theft for purposes of 165 is certainly broad enough to include the Ponzis, the Madoffs, and the Nadels. The courts emphasis, in particular, on swindling, false pretenses, and any other form of guile potentially includes securities fraud within its scope. The Service acknowledged this possibility in Chief Counsel Advice 200811016.11 In CCA 200811016, the investors invested in Company X, a mortgage lending company. Company X was later acquired by Company Y, but Company X remained in existence and continued soliciting funds from investors. After some time, Company Y was staying afloat only through loans from Company X, and Company X was solvent only by treating its loans to Company Y as assets on its financial statements. Company Xs officers and directors misrepresented the financial condition of Company X in its financial statements and prospectuses, and the officers and directors were later criminally charged with securities fraud. In addition, at least one Company X Officer was indicted for obtaining property by false pretenses under the applicable state law. Chief Counsels Office opined that these facts establish that a theft occurred, notwithstanding the structure of the transactions. A loss that is the direct result of fraud or theft is deductible under 165, even though the theft is accomplished through a purported borrowing or offer to sell a security.12 Counsels Office relied, in part, on Revenue Ruling 71-381, as follows.13 In Rev. Rul. 71-381, the taxpayer was induced to lend money to a corporation by fraudulent financial statements provided by the corporations president . As a result, the president of the corporation was convicted by a court for violating the state securities law by issuing false and misleading financial documents. Since the money was obtained by false representations constituting a misdemeanor under state law, the taxpayer was entitled to a theft loss deduction. Citing the requirements reflected in Revenue Ruling 71-381 of (i) reliance on the part of the investor and (ii) specific intent to defraud or misappropriate monies, Counsels Office withheld a finding of theft as to any particular investor in X Company without additional facts.14 In Revenue Ruling 77-18, 1977-1 C. B. 46, the Service similarly concluded that a theft loss occurred under circumstances in which a taxpayer received shares of stock in a company (X Company) in exchange for his shares of stock in another company (G Company) pursuant to a merger agreement between the two companies. Soon thereafter, X Company filed for bankruptcy. The bankruptcy trustee reported that the primary goal of the fraud participants was to inflate. the market price of Xs stock. by reporting nonexistent income and assets on the corporate books and failing to record liabilities.15 The law of the state in which the taxpayer in Revenue Ruling 77-18 resided included within its definition of theft, the obtaining of property by false pretenses. Thus, the Service concluded as follows: In the instant case, false representations about the financial condition of X were made to Gs stockholders with the intent to induce them to vote for the merger. The responsible X officials knew of the falsity of the financial statements they issued. The stockholders of G relied upon the false financial statements at the time they decided to exchange their stock for X stock which was worth substantially less than was represented. The exchange was a theft by false pretenses under the laws of. the State and therefore, meets the definition of theft for Federal Income tax purposes . 16 A number of states include the obtaining of property by false pretenses within their definition of theft.17 Thus, circumstances that give rise (or would give rise) to a charge of theft by false pretenses are favorable to a characterization of theft under IRC 165. Circumstances resulting in criminal charges for the sale of unregistered securities can also give rise to a theft characterization under IRC 165. In Vietzke v. Commissioner . 37 T. C. 504 (1961), the Tax Court upheld the taxpayers theft loss treatment for funds invested in what was purported to be an insurance company directly through the company principals. Contrary to the representations in the prospectus, the stock and the company were not properly registered. The company principals were criminally indicted on charges of violating Indiana Securities Law by selling unregistered securities through an unregistered agent. The Tax Court rejected the Services claim that the company principals lacked criminal intent, finding as follows: To the contrary, we view it as a blundering but intentional attempt on the part of. the principals to increase their personal resources without benefit of law. We agree with. the taxpayers contention that he was swindled. 18 Fortunately for the taxpayer in this case, the Tax Court found that the perpetrators were not fumbling fools, but felonious villains. Interestingly, the Tax Court in Vietzke did not rely on the elements of the crime with which the principals were charged (i. e. the sale of unregistered securities) in concluding that the taxpayer had suffered a theft loss. Nor did the Tax Court rely on the statutory crime of theft under Indiana law, having found none denoted theft per se . Instead, the Tax Court pointed to the broad definition of theft established by the Bromberg Court.19 The court was simply satisfied that, based on the facts, the principals acted with a criminal intent to deprive the taxpayerinvestor of his funds. The Service agreed that churning of, and unauthorized transactions in, the taxpayers brokerage account by his broker constituted theft under the applicable state law for purposes of IRC 165 in Jeppsen v. Commissioner . 70 T. C.M. (CCH) 199 (1995).20 There, the taxpayer, a carpet installer, invested monies he was saving with a nationally-recognized brokerage firm. The broker (i) falsified the taxpayers new account documents, labeling him an experienced investor, (ii) engaged in unauthorized transactions, including purchasing stocks on margin, and (iii) churned the taxpayers account. Although finding the conduct constituted theft, the court nonetheless denied the theft loss deduction for the year in which the taxpayer claimed it as, in that year, the taxpayer was exploring the possibility of filing a lawsuit against the brokerage firms involved. Thus, the taxpayers claim of a theft loss was premature, as he retained, and was pursuing, a reasonable prospect of recovering his loss.21 The Use of Judicial Estoppel to Support a Theft Characterization. The test for theft characterization under IRC 165, as previously explained, is not dependent upon a criminal indictment or conviction. Rather, the test depends upon whether the conduct evidences a criminal appropriation of anothers property by theft, false pretenses, and any other form of guile. without regard to the exact nature of the crime. 22 Thus, there have been cases in which the Service and courts have allowed theft loss treatment even in the absence of a criminal indictment or conviction of the perpetrators.23 Nonetheless, a criminal charge or conviction is helpful in supporting the specific intent required of the perpetrator.24 When there is a criminal conviction of, or a guilty plea from, the perpetrator of the fraud, the defrauded investor should be able to assert that the Service is judicially estopped from contesting the characterization of the investment loss as a theft loss if the federal government has successfully prosecuted the perpetrator for the conduct at issue. Judicial estoppel prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or earlier proceeding.25 The doctrine of judicial estoppel is similar to the doctrines of res judicata and collateral estoppel, which prevent parties from relitigating issues decided in prior proceedings by a court of competent jurisdiction.26 However, judicial estoppel focuses only on the relationship between a party and the courts and seeks to protect the integrity of the judicial process by preventing a party from successfully asserting one position before a court and then asserting a contradictory position before the same or another court merely because it is now in that partys favor to do so.27 In Vincentini v. Commissioner . 96 T. C.M. (CCH) 400 (2008), the Tax Court applied judicial estoppel to prevent the Service from denying that a theft occurred with respect to a taxpayers investment in a convoluted factoring program involving U. S. and Costa Rican participants. The federal government had prosecuted successfully the principals of the factoring program on various federal charges, including money laundering, mail and wire fraud, and aiding and assisting the filing of false income tax returns. Rejecting the Services contention that the taxpayer was not a victim of theft, the Tax Court held as follows: Because respondents position is inconsistent with the position asserted by the Government in the. criminal case, we conclude that the application of the doctrine of judicial estoppel is appropriate. Applying the doctrine, we hold that respondent is precluded from arguing that petitioner was not a victim of theft. 28 In short, because the federal governments position, in the criminal case, was that the taxpayer was one of the victims of the fraud for which the government was prosecuting the principals of the factoring program, the federal government, through the Service, was rightfully estopped from taking a contrary position in Tax Court.29 The Use of the Services Safe Harbor for Theft Loss Treatment for Losses Resulting From Ponzi Schemes. On March 17, 2009, the Service issued Revenue Procedure 2009-20,30 creating an optional safe harbor for treatment of certain investment losses as theft losses (think Madoff). Under this Procedure, if the taxpayer elects the safe harbor, a theft loss is deemed to occur. The deemed theft loss, called a qualified loss, occurs when a taxpayer has invested in a specified fraudulent arrangement and one or more of the perpetrators has been criminally charged with one or more crimes that would meet the definition of theft for purposes of IRC 165, provided certain other conditions are satisfied. This safe-harbor treatment is available to losses for which the discovery year, as specifically defined in the Procedure, is 2008 or later.31 1. Establishing the Loss as a Qualified Loss. First, to utilize the safe harbor, the taxpayer must have invested in a specified fraudulent arrangement. A specified fraudulent arrangement is, generally speaking, a Ponzi scheme.32 Second, to utilize the safe harbor, one or more of the perpetrators must have been charged, criminally, by indictment, information, or complaint (not withdrawn or dismissed) under state or federal law. The criminal charges, as previously mentioned, must constitute theft under the law of the jurisdiction in which the theft occurred, consistent with the existing case law governing this issue.33 It is worth noting that there are a number of reasons criminal charges may not be filed against the perpetrator, such as death of the perpetrator, a disinclination to prosecute while SEC civil investigations are ongoing, or the small size of the fraudulent scheme in comparison to other schemes given limited prosecutorial resources. The conduct of the perpetrator may nonetheless constitute theft under the law of the applicable jurisdiction, and the victims may still qualify for theft loss treatment for their investment losses, just not under the safe harbor of Revenue Procedure 2009-20. The third requirement of a qualified loss under the safe harbor applies only if the criminal charges are by complaint versus indictment or information. If the charges are by complaint (versus indictment or information), then one of the following three factors must also be present: (i) the complaint must allege an admission by the lead figure, or, (ii)a receiver or trustee must have been appointed for the specified fraudulent arrangement or, (iii) the assets of the specified fraudulent arrangement must have been frozen.34 The reason for this added requirement for criminal charges by complaint versus indictment or information is the lesser standard of probable cause generally applicable to criminal charges by complaint. In addition, the taxpayer must have clean hands. If the taxpayer had actual knowledge of the fraudulent nature of the arrangement prior to its public outing, the taxpayer cannot utilize the safe harbor. Nor is the safe harbor available to investors in tax shelters (as defined in IRC 6662(d)(2)(C)(ii)) or to those who invested in the fraudulent arrangement through a fund or other entity.35 This latter restriction retains the Services historic hostility to granting theft loss treatment to defrauded investors who were not in privity with the perpetrator of the fraud. 2. Year of Discovery of the Loss and Timing of the Deduction. Under IRC 165(e), all theft losses are treated as sustained during the taxable year in which the taxpayer discovers the loss.36 Discovery of the theft, whether from a fraud, embezzlement, or other kind of misappropriation of the taxpayers property, has not, however, ended the query. Taxpayers also have had to grapple with the general limitation applicable to all losses subject to IRC 165(a). That general limitation has required consideration of whether there exists a reasonable prospect of recovery from insurance or otherwise.37 If a reasonable prospect of recovery exists as to part of a theft loss, then a deduction as to that part of the loss is unavailable until the year in which it can be determined, with reasonable certainty, that no recovery or reimbursement will be received.38 These two issues 8211 8211 whether a reasonable prospect of recovery exists and whether it can be ascertained with reasonable certainty that no recovery or reimbursement will be received have generated much litigation, because they have are based upon the facts and circumstances of each case. For victims of Ponzi schemes who choose the safe harbor provisions of Revenue Procedure 2009-20, the uncertainty concerning the timing of the deduction is eliminated. Under the Procedure, the year of discovery of the loss of a qualified investment, is also the year that the amount to be deducted can be deducted. The discovery year is the year in which occurs the previously-described criminal indictment, information, or complaint. 39 The amount deductible in the discovery year is determined by simply applying one of two fixed percentages to the qualified investment. Subject to certain exclusions, qualified investment generally means all amounts (cash or basis of property) invested in the fraudulent arrangement, plus income from the arrangement previously included in income for federal tax purposes over amounts of cash or other property withdrawn from the arrangement, whether designated principal or income.40 If recovery is not pursued against potential third parties,41 ninety-five percent (95) of the qualified investment is considered in the year of discovery. If recovery is being, or intended to be, pursued from potential third parties,42 then seventy-five percent (75) of the qualified investment is considered in the year of discovery. The product of whichever of the foregoing formulas applies is then reduced by the following: (i) any actual recovery, (ii) any actual or potential claim for reimbursement under the qualified investors insurance policy, (iii) any actual or potential claim for reimbursement under contractual arrangements (other than insurance), and (iv) any actual or potential insurance recovery from SIPC.43 The resulting amount is then available as a deduction in the year of discovery.44 If a taxpayer electing safe-harbor treatment later recovers amounts in excess of the amount of qualified investment deducted under the safe harbor, that excess amount is includible in income under the tax benefit rule. Likewise, an additional deduction may be available in a later year provided that the additional deduction has been determined, with reasonable certainty, to be non-recoverable.45 Unfortunately, as previously mentioned and as discussed further below, the application of the determined with reasonable certainty test is fact-intensive and troublesome. Fortunately, under the safe harbor, the taxpayer escapes this troublesome query for much of the theft loss. 3. Special Filing Requirements. A taxpayer qualifying for, and electing, the safe-harbor treatment of Revenue Procedure 2009-20 must complete a statement in the form of the statement attached as Appendix A to the Revenue Procedure. The statement is filed with the taxpayers federal income tax return for the discovery year, along with IRS Form 4684 (Casualties and Thefts), which is to be completed in accordance with Section 6.01 of the Revenue Procedure. Lastly, taxpayers who elect not to apply the safe harbor treatment of Revenue Procedure 2009-20 are subject to all of the requirements for establishing a theft loss under existing law.46 In summary, investment fraud has dire consequences for those defrauded. It can mean the loss of a lifetime of savings, the burden of unpaid bills, and the prospect of working well beyond an age of physical capability. Whether it occurs through the unauthorized churning of an investors account, the presentation of fraudulent financial statements, or the stealing from Peter to pay Paul found in the classic Ponzi scheme, it is right for the Service to provide investors robbed in this fashion the same relief provided other victims of theft. Unfortunately, many more situations fall outside of the safe harbor of Revenue Procedure 2009-20 than fall within it. It is incumbent upon the taxpayer taking a theft loss resulting from an investment arrangement, whether within or without the safe harbor, to be sure that the theft loss deduction is well supported. III. THE PRIVITY REQUIREMENT AND THE CORRESPONDING DENIAL OF THEFT LOSS TREATMENT FOR OPEN-MARKET TRANSACTIONS. The court in Edwards v. Bromberg . 232 F. 2d 107, articulated the most frequently cited definition of theft for purposes of 165. The Bromberg courts broad definition of theft, intended to cover and covering any criminal appropriation of anothers property is still cited.47 Even the Service continues to cite the broad Bromberg definition of theft.48 Yet, in application, there are seemingly illogical inconsistencies that suggest a hostility to providing a theft loss deduction to investors who have been victimized by fraud committed by the principals of companies in which they invested, but with whom they did not deal directly. For example, in DeFusco v. Commissioner . 38 T. C.M. 920 (CCH 1979), the Tax Court held (and the IRS agreed) that the taxpayer suffered a theft loss with respect to stock acquired through an employee stock option plan offered by his employer, Equity Funding, a publicly traded company.49 Following the bankruptcy of Equity Funding, its officers were criminally charged with filing false statements and securities fraud under federal law for reporting non-existent assets and income. Even though the taxpayer resided in California, and the company officers were criminally charged under federal law and not under the Penal Code of California, the Tax Court found that the facts and circumstances supported theft loss treatment as to the stock acquired through the Equity Fundings employee stock option plan.50 The taxpayer, however, purchased only a small percentage of his Equity Funding stock through the Companys employee stock option plan. The bulk of his Equity Funding stock was purchased on the open market. As to this stock, the Tax Court upheld the Services denial of theft loss treatment, reasoning that the states criminal theft statute required that there be an appropriation by the defrauder of the victims property.51 This misappropriation by the defrauder of the victims property could only occur, concluded the Tax Court, if there was privity between the taxpayer and the defrauder as to the stock purchased. Finding no privity between the Equity Funding officers and the taxpayer with respect to the stock the taxpayer purchased on the open market, the Tax Court refused to find a theft, notwithstanding that the taxpayer relied on the same fraudulent representations of the Equity Funding officers with respect to both the stock acquired through the Companys employee stock option plan and the stock acquired on the open market. The imposition of a privity requirement originates from the Services and the courts interpretation of the specific intent prerequisite for criminal theft, appropriation of anothers property by false pretenses, and other conduct amounting to theft under the law of many states. If there is no privity between the defrauded investor and the defrauder, reason the courts, then the defrauder could not have specifically intended to defraud the investor.52 This constrained approach is illogical when the investor can show reliance on fraudulent representations and omissions of the issuer of the securities in purchasing the securities, even though the securities are purchased on the open market. In fact, in some cases, it is clear that the court denied theft characterization only after analyzing whether the evidences supported the taxpayers reliance on the criminal conduct of the defrauders in purchasing the securities. In Paine v. Commissioner . 63 T. C. 736 (1975), the Tax Court denied theft loss treatment for shares in Westec Corp. purchased by the taxpayer on the open market. Subsequent to the taxpayers purchase, the principal officers and employees of Westec were indicted for violations of federal securities and mail fraud statutes for falsely representing acquisitions, transactions, and revenue growth with respect to the company. Bankruptcy followed. The taxpayer argued that Westecs fraud caused him to purchase the Westec stock at artificially-inflated prices, thereby constituting a theft to that extent.53 The Paine Court noted the lack of privity between the taxpayer and the Westec officers and employees, as well as the corresponding lack of specific intent on the part of the perpetrators to defraud Mr. Paine in particular. More troubling for the taxpayer, however, was the taxpayers inability to present evidence establishing that his Westec purchases were induced by the misrepresentations of the Westec officers, an element of theft by false pretenses under the applicable Texas law. Because the record contained no evidence of when the stock was purchased, it was impossible to determine whether the misrepresentations were made before the taxpayer purchased the stock. 54 The absence of any evidence establishing what portion of the loss was attributable to the fraud also led to the denial of theft loss treatment. Even if the decline in value were known, it would be impossible on the record of this case to estimate the specific portion of the decline attributable to the illegal activities of the corporate officers. as opposed to the decline that might be attributable to business risks.55 The foregoing analysis raises the question whether the Tax Court in Paine would have found privity had the taxpayer been able to prove the amount of loss due to the fraud and that he relied upon the fraudulent representations prior to purchasing his Westec stock. Criticism of the Privity Requirement. The Tax Court in DeFusco recognized that the taxpayer suffered a financial disaster. The Equity Funding losses nearly wiped out the taxpayers entire life savings.56 The Court was willing to consider disaster treatment, i. e. treatment as a theft under IRC 165(c), only for those losses resulting from the stock acquired through the employee stock option program. Yet, the same fraudulent representations were made as to both the stock option stock and the open market stock. The same losses were incurred for both the stock option stock and the open market stock. The only difference was in the form taken by the taxpayers purchase of the Equity Funding stock. The result in DeFusco is at odds with the directive found in the Treasury Regulations promulgated under IRC 165 which provides that substance and not mere form shall govern in determining a deductible loss.57 While a substance over form doctrine as to the tax treatment of transactions has been used against taxpayers by the Service and recognized by the courts since the Supreme Courts decision in Gregory v. Helvering . 293 U. S. 465 (1935), taxpayers have not been as fortunate in their attempted use of this doctrine. Instead, taxpayers, once having chosen the form of their transaction, are generally stuck with the tax consequences of the chosen form.58 Nonetheless, there are instances in which the taxpayer has prevailed by using a substance-over-form argument. For example, in Estate of Durkin v. Commissioner . 99 T. C. 561, 575 (1992), the Tax Court stated that resort to substance is not a right reserved for the Commissioners exclusive benefit, to use or not use depending on the amount of tax to be realized.59 Courts have recognized taxpayers right to use substance over form in the absence of dishonesty, inconsistency in tax treatment, and unjust enrichment.60 In the context of theft losses, there is no taxpayer dishonesty, no unjust enrichment (theft losses are not deductible if they are reimbursed through insurance or otherwise), and little opportunity for inconsistent tax treatment. There are only individuals who suffer some calamity as the result of someone elses criminal conduct. The Tax Court in Vietzke v. Commissioner . 37 T. C. 504 (1961), looked at the substance of what occurred and found a theft of monies invested by the taxpayer in a company established by perpetrators of a fraud. The perpetrators, also the principals of the company, proceeded to use the companys funds for their own personal use. Rejecting the Services contention that the theft was actually from the company and not the taxpayer, the Tax Court found as follows: While the parties disagree as to whether. the company ever came into existence as a corporate entity, whether it did or not is unimportant in this case. Respondents regulations under section 165 provide, in part: Substance and not mere form shall govern in determining a deductible loss. Sec. 1.165-1(b), Income Tax Regs. The shell of the corporation cannot cast a shadow so deep that the true purposes of. the perpetrators are hidden from the light of judicial scrutiny. The corporate entity was the device. the perpetrators used to route the subscribers money into their pockets .61 The Services position, in Vietzke was, in effect, a privity argument. The Service argued that the theft did not occur directly from the taxpayer but, instead, through the corporation. The Tax Court rightfully declined to elevate the form of the transactions above what occurred in substance, i. e. the monies invested in the company by the taxpayers were wrongfully used to enrich the principals of the company. The Tax Court, in Vietzke . recognized that a company can be wrongfully used to enrich its principals and that such use constitutes a theft from investors. Despite this recognition, neither the Service nor the Tax Court has applied this principle to investments purchased on the open market, even when the companies principals or executives have intentionally misrepresented the companies financial conditions for the purpose of maintaining an inflated stock value and enriching themselves. The reasoning for precluding a theft characterization in all cases in which the investor purchases the security on the open market is weak. For example, the facts in the WorldCom debacle are similar to those in Vietzke . which included the use of a company by the companys principals to enrich themselves at the cost of the companys investors. In the case of WorldCom, numerous investigative bodies concluded that WorldComs CEO, Bernie Ebbers, its Chief Financial Officer, Scott Sullivan, and certain other of its executives and officers engaged in fraudulent omissions and misrepresentations of the WorldComs financial condition in order to enrich themselves by keeping the value of the stock artificially high. The Special Investigative Committee of the Board of Directors of WorldCom, newly appointed following its bankruptcy filing, drew the following conclusions. From 1999 until 2002, WorldCom suffered one of the largest public company accounting frauds in history. As enormous as the fraud was, it was accomplished in a relatively mundane way more than 9 billion in false or unsupported accounting entries were made in WorldComs financial systems in order to achieve desired reported financial results . Most of WorldComs people did not know it was occurring. Rather, the fraud occurred as a result of knowing misconduct directed by a few senior executives. and implemented by personnel in its financial and accounting departments in several locations. The fraud was the consequence of the way WorldComs Chief Executive Officer, Bernard J. Ebbers, ran the Company. Ebbers presented a substantially false picture to the market, to the Board of Directors, and to most of the Companys own employees. At the time he was projecting, and then reporting, continued vigorous growth, he was receiving internal information that was increasingly inconsistent with those projections and reports. Ebbers was aware, at a minimum, that WorldCom was meeting revenue expectations through financial gimmickry. Yet, he. failed to disclose the existence of these devices or their magnitude. The fraud was implemented by and under the direction of WorldComs Chief Financial Officer, Scott Sullivan. As business operations fell further and further short of financial targets announced by Ebbers, Sullivan directed the making of accounting entries that had no basis. in order to create the false appearance that WorldCom had achieved those targets.62 That Committee also found as follows: Policy was disregarded in connection with a transaction in which Ebbers agreed to sell three million shares of WorldCom stock on September 28, 2000. The sale occurred less than 30 days before an earnings announcement, in violation of a policy Ebbers himself had circulated just a few months earlier. Moreover, there is compelling evidence that this sale took place while Ebbers was in possession of significant nonpublic information about a downturn in revenue growth and about proposed actions that could have a negative impact on WorldComs stock price .63 In sum, the evidence in WorldCom supported findings that Ebbers, Sullivan, and certain other WorldCom officers knowingly, intentionally, and criminally falsely represented WorldComs financial condition to keep the value of the stock artificially high, crimes for which the foregoing individuals received prison sentences. They criminally enriched themselves, through use of WorldCom, at the expense of public investors yet, because these public investors purchased their WorldCom stock on the open market, in the Services view, these public investors would not be the victims of a theft entitled to a theft loss deduction under IRC 165. The Services position on the use of a theft characterization for open market transactions is unambiguously articulated in IRS Notice 2004-27, 2004-16 IRB (March 25, 2004). The holding of that Notice reads as follows: IRS wont allow Code Sec. 165 loss deduction equal to decline in market value of stock that may have been caused by fraudulent accounting practices or misconduct of corp. officers . Only deduction allowed under Code Sec. 165(a) is for completely worthless stock decline in value of stock isnt allowable until year in which loss is sustained through sale or exchange of stock. Code Sec. 165(f) states that losses from sales and exchanges of capital assets are capital losses and thus allowed only as permitted in Code Sec. 1211 and Code Sec. 1212.64 In short, if a companys principals or executives, through fraudulent or other wrongful conduct, may have caused a decrease in the value of stock purchased on the open market, the purchaser cannot characterize the decrease in value as a theft under Section 165. In support of its position in IRS Notice 2004-27, the Service cited Treasury Regulation 1.165-4(a) which provides, in part, as follows: No deduction shall be allowed under section 165(a) solely on account of a decline in the value of stock owned by the taxpayer when the decline is due to a fluctuation in the market price of the stock or to other similar cause . (Emphasis added.) That regulation, however, expressly addresses only those situations where the decline in value is caused by fluctuations in market price. The regulation does not address those situations where the decline in market price is caused by intentional, criminal malfeasance of a companys principals that would amount to a theft under the law of the applicable jurisdiction. To get to its seemingly blanket prohibition on theft loss characterization for investments purchased on the open market, the Service, in Notice 2004-27, simply concludes that the courts have consistently disallowed theft loss deductions relating to a decline in the value of the stock that was attributable to corporate officers misrepresenting the financial condition of the corporation, even when the officers were indicted for securities fraud or other criminal violations.65 Yet, even the Paine v. Commissioner 66 case cited by the Service in Notice 2004-27, a case that involved criminal misrepresentations of the financial condition of a publicly-traded company by its principals, fails to support the Services conclusion. Initially, the Paine Court pointed to the difficulty the taxpayer had in satisfying the specific intent requirement of the applicable state laws concept of theft, requiring that the perpetrator have the specific intent to appropriate the victims property. Presumably, if the taxpayer could have proven that the perpetrators specifically intended to enrich themselves at the expense of the investors in their publicly-traded company, the taxpayer would have been able to satisfy this element. Thus, it was not the existence of the transaction on the open market, per se . which precluded a theft characterization, but the inability to prove that the taxpayer was among the perpetrators intended victims.67 Also troubling to the Paine Court was the taxpayers inability to prove that he relied upon the fraudulent misrepresentations when he acquired his stock on the open market and what portion of the decline in value of the stock was due to the fraudulent representations. It is well settled that when a theft is accomplished through false representations, the false representations must have induced the injured party to part with his property. Petitioner has not only failed to produce evidence that he relied on the misrepresentations, but has also failed to show that his loss was related to those misrepresentations. To establish a causal connection between the fraudulent representations and petitioners purchase, the representations must have been made prior to the purchase. Since the record contains no evidence indicating when the stock was purchased, it is impossible to determine whether the representations were made before or after petitioners purchase. Finally, the deduction must also be denied because the petitioner has failed to produce any evidence regarding the amount of the loss. Even if the decline in value were known, it would be impossible on the record of this case to estimate the specific portion of the decline attributable to the illegal activities of the corporate officers petitioner describes as theft, as opposed to the decline that might be attributable to business risks, market decline, poor or derelict management . 68 What is missing from both the holding and the analysis of the Tax Court in Paine is any hint of a per se prohibition on characterizing the loss of money invested by purchasing stock on the open market as a theft regardless of the circumstances. Similarly, in MTS International, Inc. v. Commissioner . 169 F. 3d 1018 (6 th Cir. 1999), the other significant case cited by the Service as support for its position, there is neither a holding nor an analysis concluding with a per se ban on theft characterizations for stock purchased on the open market. Instead, as in Paine . the court pointed to the lack of evidence establishing the taxpayers reliance on the fraudulent misrepresentations in denying a theft characterization, stating as follows: Given. the taxpayers concession that he did not believe that the information received. was truthful, it would be illogical to find that. the taxpayer relied upon that information in making a significant investment. Such reliance is a necessary element of theft by deception under. the state law.69 The courts denial of theft loss treatment, then, was not based on the existence of a purchase on the open market rather, the courts denial was based on the taxpayers inability to satisfy the reliance element of the law of the jurisdictions concept of theft. Lastly, in Jensen v. Commissioner . 66 T. C.M. (CCH) 543, 1993 WL 325102 (1993), the Tax Court articulated what is perhaps the strongest repudiation of a per se privity requirement. In Jensen . the Tax Court rejected the Services position that the taxpayers were not entitled to a theft loss deduction for monies invested in a Ponzi scheme through a friend who acted as a broker with respect to the taxpayers and other investors in the scheme, stating as follows: We find, as a factual matter, that petitioners were investors in. the Ponzi scheme. There is no requirement that an investor have direct contact with the entity in which he is investing. It is not uncommon for investors to deal only with their brokers and never have direct contact with their investments. In such cases, the brokers act as conduits for the investors funds. The record in the case before us indicates that. the brokers role in the. Ponzi scheme was that of a broker he was clearly acting as a conduit for his clients funds. All of the parties involved, including. the perpetrators of the Ponzi scheme, understood that the funds that. the broker provided to. the Ponzi scheme were not merely. the brokers funds but were also his clients funds.70 The Service had argued that the taxpayers were not entitled to a theft loss deduction, contending that they only had direct contact with the broker and thus invested with the broker and not the Ponzi scheme. The Tax Court unambiguously rejected a requirement of direct contact.71 As the foregoing cases and cited Treasury Regulation illustrate, open market purchases of stock in companies whose principals criminally misrepresent the companies financial condition or otherwise criminally use the companies to enrich themselves, create problems of proof with respect to intent, reliance, and causation. They, however, do not logically support a per se ban on theft loss treatment for investments purchased on the open market based on the lack of privity between the investors and the investment or fraud perpetrators. In the context of open market transactions, issues of intent, reliance, and causation should not bar a theft loss deduction provided the taxpayer has established some causal connection between the securities fraud and the loss in value of his investment.72 Difficulties in proof surely will exist. These difficulties, however, should not deny the taxpayer the right to a lawful ordinary, theft loss deduction for a loss caused by the criminal wrongdoing of another. IV. TIMING IS EVERYTHING IRC Section 165(a) articulates the general rule for the timing of a deduction for losses allowable under Section 165, permitting a deduction for any loss sustained during the taxable year and not compensated for by insurance or otherwise. Under the general rule applicable to all losses deductible under Section 165 (i. e. certain business losses, certain investment losses, and certain casualty and theft losses), a loss is sustained when it is evidenced by closed and completed transactions and when it is fixed by identifiable events.73 For example, the dousing of a fire pretty much fixes the event of a casualty loss resulting from a fire. However, in the case of theft losses resulting, for example, from fraud or embezzlement, often the loss is not discovered until long after the perpetrator has successfully misappropriated the victims property. Because a loss allowable as a deduction under Section 165 is allowable only for the taxable year in which. the loss is sustained, accurately determining the year in which the loss is sustained is crucial.74 For this reason, in 1954, Congress enacted IRC 165(e) to provide that any loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovers the loss.75 Prior to the enactment of IRC Section 165(e), taxpayers were denied theft loss deductions for thefts that were not discovered until years after the actual theft or embezzlement. By then, the running of the statute of limitations for amending the victims tax return for the year in which the theft or embezzlement or fraud occurred precluded the taxpayer from ever taking the loss. Section 165(e), providing that a theft loss is sustained in the year it is discovered, however, does not trump the requirement under Section 165(a), which includes consideration of prospects of recovery.76 That is, the Service will not allow the deduction of a loss if the taxpayer is pursuing recovery or reimbursement of the loss from other sources. For theft losses, then, a loss is sustained when it is discovered. Even after discovery of the loss, however, it is not sustained if there is a claim for reimbursement as to which there is a reasonable prospect of recovery. If the loss (or a portion of the loss) is subject to a claim with respect to which there is a reasonable prospect of recovery, then the loss (or that portion of the loss) is not sustained until the taxable year in which it can be ascertained with reasonable certainty whether or not such reimbursement will be received. 77 The applicable Treasury Regulation provides verbatim as follows: A loss arising from theft shall be treated under section 165(a) as sustained during the taxable year in which the taxpayer discovers the loss. See Section 165(e). Thus, a theft loss is not deductible under section 165(a) for the taxable year in which the theft actually occurs unless that is also the year in which the taxpayer discovers the loss. However, if in the year of discovery there exists a claim for reimbursement with respect to which there is a reasonable prospect of recovery, see paragraph (d) of Treasury Regulation 1.165-1.78 Treasury Regulation 1.165-1, in turn, provides in pertinent part as follows: If. there exists a claim for reimbursement with respect to which there is a reasonable prospect of recovery, no portion of the loss with respect to which reimbursement may be received is sustained. until it can be ascertained with reasonable certainty whether or not such reimbursement will be received.79 In short, the following two questions must be addressed following discovery of a theft loss: (1) Is there a pending claim with a reasonable prospect of recovery as to some or all of the loss and (2) When can it be determined, with reasonable certainty . what the amount, if any, of the reimbursement will be as to some or all of the loss If there is no claim with a reasonable prospect of recovery in the year of discovery of the theft loss, then the year of discovery is the year of the deduction. If, however, there is a claim with a reasonable prospect of recovery, then the proper year of deduction is the year in which it can be determined with reasonable certainty that the loss is non-recoverable, a determination which can be made partially in one year and partially in another year if the reasonable certainty test is not satisfied in one year as to all of the loss.80 The questions of whether there exists a claim with a reasonable prospect of recovery and when a recovery, if any, will be forthcoming as determined with reasonable certainty are, unfortunately, highly fact-intensive issues.81 They are, nonetheless, very important issues to get right. A mistimed loss deduction may become a permanently lost deduction if the proper year of the deduction is an earlier year and the tax return for that earlier year cannot be amended because of the application of the statute of limitations on amending tax returns.82 The general limitations period for filing an amended return to report an additional deduction and claim a refund of previously paid taxes is the later of three (3) years from the date the return was filed or two (2) years from the date the associated tax was paid.83 Accordingly, if a taxpayer discovers a theft loss in year 1 for which a taxpayer has filed or intends to file a suit or claim for recovery or reimbursement, the taxpayer will be required to postpone any deduction until the taxpayer has determined, with reasonable certainty, that some or all of the loss subject to the suit or claim is non-recoverable. If the taxpayer determines incorrectly that the loss is non-recoverable in, for example, year 6, when the loss could have been determined, with reasonable certainty, to be non-recoverable in year 2, then the taxpayer will have lost the opportunity to amend the year 2 tax return to claim the loss. The foregoing result may sound too harsh to occur in actuality, but this was exactly the situation in which the taxpayers in Wisnewski v. United States . 79-2 USTC (CCH) 9496 (N. D. Tex. 1979) found themselves. There the taxpayers discovered a loss deductible under IRC 165(a) in 1968, and they filed suit against the alleged perpetrator in that same year. The litigation settled by consent decree in 1972, and the taxpayers claimed their losses, which proved uncollectable, as reasonably ascertainable, in that year, 1972. In the latter part of 1975, the Service examined the taxpayers 1972 return and disallowed the loss, contending that the amount of the loss was ascertainable with reasonable certainty in an earlier year, 1971, a year now time-barred by the general three-year statute of limitations for amending tax returns. The court upheld the Services position, noting that, by 1971, the alleged perpetrator had disposed of all of his assets that were not exempt from creditors and that the taxpayers had been advised of this fact by their attorney, thereby exemplifying the importance of getting the timing issue correct. One option for taxpayers facing uncertainty regarding the proper year of the timing of a deduction because of the pendency of litigation against the perpetrator or the collectability of a claim or judgment is to file a protective refund claim. Protective claims preserve the deduction or position of the taxpayer until the completion of events or contingencies upon which the deduction or position is based. Protective refund claims are creatures of case law and the Service has discretion in deciding how to process protective claims. If treated as such by the Service, protective refund claims have the effect of a continuing claim, thereby preserving the position notwithstanding the running of the statute of limitations on amending returns. Generally, the Service will delay acting on the protective claim, thereby preserving its status as a continuing claim until the pending litigation or other contingency is resolved.84 The Totality of the Facts and Circumstances Govern Reasonable Prospect of Recovery and Reasonable Certainty Tests. There is little guidance in the treasury regulations promulgated under IRC 165 concerning the facts and circumstances relevant to the determination of whether a reasonable prospect of recovery exists and at what point it can be determined, with reasonable certainty, what the amount, if any, of the recovery will be. The guidance in the regulations is as follows: Whether a reasonable prospect of recovery exists with respect to a claim for reimbursement of a loss is a question of fact to be determined upon an examination of all facts and circumstances. Whether or not such reimbursement will be received may be ascertained with reasonable certainty, for example, by a settlement of the claim, by an adjudication of the claim, or by an abandonment of the claim. When a taxpayer claims that the taxable year in which a loss is sustained is fixed by his abandonment of the claim for reimbursement, he must be able to produce objective evidence of his having abandoned the claim, such as the execution of a release.85 At least the foregoing guidance is some guidance, even though the examples of facts giving rise to a determination with reasonable certainty of no recovery seem fairly obvious. The settlement or adjudication of a taxpayers pending litigation to recover a theft loss from the perpetrator allows for a determination of the amount of the unrecoverable loss with enough certainty to allow for a deduction. A taxpayers release or abandonment of a pending claim does likewise. Less obvious are those situations where a court has appointed a receiver or trustee with respect to the assets of the perpetrator of the fraudulent scheme. A case in point is Kaplan v. United States . 2007 WL 2330841 (M. D. Fla. Aug. 15, 2007), a case in which the taxpayers, a husband and wife, lost millions of dollars in a Ponzi scheme. As previously discussed, for victims of certain Ponzi schemes that elect and qualify for the safe harbor treatment of Revenue Procedure 2009-20, the timing issues associated with determining the year in which the losses are deductible are mostly moot. The safe harbor applies fixed percentages of 75 or 95, depending upon the existence of certain claims for recovery, to the qualifying losses to arrive at the amount deductible in the year of discovery of the loss, as defined in the Revenue Procedure. For cases falling outside the safe harbor, Kaplan illustrates the frustration associated with application of the timing issues. The perpetrator in the Kaplan case ran a Ponzi scheme from 1986 until May of 2001. The taxpayers in Kaplan invested over 5 million with the perpetrator from 1992 through October of 2000. Prior to discovery of the Ponzi scheme, the Kaplans reported on their tax returns millions more in income purportedly earned (but not distributed) on the monies they had invested. Income such as that purportedly earned by the Kaplans on their monies invested is often referred to as phantom income in the context of Ponzi schemes. In 2001, the perpetrator filed for bankruptcy. In 2002, the perpetrator pled guilty to fifteen felony counts and admitted to operating a Ponzi scheme. Had the safe harbor been available to the. Kaplans, the year of the deductibility of their resulting theft losses would have been 2002, the year in which the perpetrator pled guilty to conduct that would have constituted theft under the law of the state where the conduct occurred.86 Instead, the taxpayers were left to pick a year for the deduction seemingly reasonable based on all of the facts and circumstances. They settled on their 2001 tax year as the year in which to claim the theft losses. At first glance, 2001 might appear to be a reasonable year in which to claim the loss, given that the perpetrator filed bankruptcy in 2001. In fact, as to the year 2001, the taxpayers presented the interim report of the bankruptcy trustee estimating that the recovery for creditors would not exceed 21. The court, however, disagreed with the Kaplans choice, concluding that the bankruptcy trustees 2001 interim report did not rise to the level of a determination with reasonable certainty . stating as follows: The trustee stated in the report that the estimated recovery of 20.92 was not his estimate for final recovery, because there were a number of unresolved factors that could either increase or decrease that final estimate. Therefore, at best, the trustees report shows that the amount that Plaintiffs would not be able to recover was unknown, and thus, could not be determined with reasonable certainty as of December 31, 2001.87 Thus, after years of court and administrative proceedings, the Kaplans learned that their theft loss deduction was not quite ripe. The Kaplans disappointment was not over. The court also addressed their claim for a theft loss for the income purportedly earned on their investment, i. e. the phantom income. This income was reinvested and thus not distributed to them. They did, however, report the income on their tax returns over the years, and they did pay taxes on the income. The Service argued that there was no income because the investment was a Ponzi scheme and there was thus no income to steal. The court agreed with the Service, notwithstanding that the taxpayers produced an IRS Memorandum addressing this particular Ponzi scheme that concluded that investors who reported income, dubbed phantom income, could take a theft loss for that phantom income under certain circumstances.88 The Kaplan case underscores the benefits of the clarity recently received from the Service for victims of certain Ponzi schemes. The safe harbor of Revenue Procedure 2009-20 eliminates the guess work associated with determining when most of the theft loss is deductible. The safe harbor includes phantom income in the calculation of the theft loss. And, even as to those taxpayers who do not elect the safe harbor treatment, the Revenue Procedure recognizes the right of taxpayers to amend prior returns to remove the phantom income and claim refunds of associated tax paid, or, if the prior year is closed by application of the statute of limitations, to include the phantom income in the principal amount of any theft loss allowable in a later year.89 Despite the poor result for the taxpayers in Kaplan . the Kaplan case and other cases are replete with language that suggests that the taxpayer need not be an incorrigible optimist with respect to determining when a loss is really lost.90 Hence, claims for recovery whose potential for success are remote or nebulous will not demand a postponement of the deduction . The standard is to be applied by foresight. We do not look at facts whose existence and production for use in later proceedings was not reasonably foreseeable as of the close of the particular year. Nor does the fact of a future settlement or favorable judicial action on the claim control our determination, if we find that as of the close of the particular year, no reasonable prospect of recovery existed.91 Courts also recognize that where the financial condition of the person against whom a claim is filed is such that no actual recovery could realistically be expected, the loss deduction need not be postponed.92 For example, in Jensen v. Commissioner . 66 T. C.M. (CCH) 543 (1993), the Tax Court rejected the Services position that the taxpayers were premature in deducting a theft loss resulting from investment in a Ponzi scheme because they had filed a claim in the bankruptcy proceeding of the broker through whom they invested. Neither the brokers bankruptcy estate, with which the taxpayers filed a claim, nor the bankruptcy estate of the Ponzi scheme perpetrators, with which the taxpayers had not filed a claim, had assets sufficient to pay the millions of dollars owed the many investors. Noting an earlier decision, the Tax Court stated: Although we held in Huey v. Commissioner, that the filing of a lawsuit creates an inference of a reasonable prospect of recovery, we conclude that petitioners filing of a proof of claim in the bankruptcy case here does not lead to the same inference. Filing the proof of claim in the bankruptcy estate was merely a ministerial act that did not require the same degree of effort as pursuing a lawsuit. 93 Thus, the court gave little weight to the taxpayers claim in the pending bankruptcy. The Jensen Court did not address the evidence upon which it relied in concluding that the year in which the taxpayers took their theft loss, 1984, was the correct year. The court did note that the bankruptcy estate of the Ponzi scheme perpetrator was converted from a Chapter 11(reorganization) to a Chapter 7 (liquidation) in early 1985 and that the brokers bankruptcy petition in early 1985 was in Chapter 7 (liquidation). One of the pertinent differences, then, between the result in Kaplan and the result in Jensen appears to be the rapidity with which the available sources of recovery were to be liquidated in bankruptcy. In circumstances where the perpetrator of the fraud has filed a Chapter 11 bankruptcy petition, a reorganization consistent with ongoing operations, postponement of the theft loss deduction beyond the year of discovery is the more likely rule. In Premji v. Commissioner . 98-1 USTC (CCH) 50,218 (10 th Cir. 1998), the court, in an unpublished opinion, upheld the Tax Courts denial of theft losses taken in the year 1990. The taxpayers in question invested in a corporation that filed for Chapter 11 bankruptcy in 1990, the year in which they claimed they were entitled to take the associated theft loss. In 1990, however, the corporations principal was assuring investors, including the taxpayers, that the corporation would emerge as a viable entity and the bankruptcy schedules reflected that the corporation had assets in excess of liabilities. In 1991, the court-appointed bankruptcy trustee determined that, in reality, the corporation had been used to perpetrate a Ponzi scheme and that its assets were less than its liabilities. The trustee then filed lawsuits to set aside preferential and fraudulent transfers, recovering, by 1995, over 8 million and expecting, at that time, to recover 14 million more. The court therefore upheld the Tax Courts conclusion that the taxpayers had a reasonable prospect of recovery in 1990, thereby denying the taxpayers deduction for the tax year 1990. The court did not suggest the year in which the taxpayers might rightfully claim all or some of the loss as without a reasonable prospect or recovery, other than to repeat the often-repeated, sometimes-seemingly-contradictory guidelines articulated by the courts, paraphrased as follows: 94 Bona fide claims for recoupment filed against third parties with a substantial possibility of success constitute a reasonable prospect of recovery, but the taxpayer is not required to be an incorrigible optimist The standard for determining whether a reasonable prospect of recovery is primarily an objective one to be applied at the close of the taxable year in which the deduction is claimed, but the taxpayers subjective beliefs at the close of that taxable year are not to be ignored. Even the substantial possibility of success guideline for recovery by litigation is muddied by language in other decisions noting that even a small chance of success might make the pursuit of legal remedies objectively reasonable, especially when the stakes are high.822195 And, this guidance is counterbalanced by the notion that a theft loss deduction need not be postponed where the financial condition of the party against whom the claim is filed is such that no recovery could be expected.96 Shifting the Burden of Proof on the Issue of Timing of the Theft Loss Deduction to the Service Under IRC 7491. Unfortunately, outside of the safe harbor of Revenue Procedure 2009-20, there is no bright-line test for determining the correct year for deducting a theft loss, whether associated with a fraudulent investment scheme or other form of theft, larceny, embezzlement, or guile. The burden of proof is, nonetheless, on the taxpayer as to the issue of the timing of the deduction, as it is with respect to whether the investment loss qualifies for theft loss treatment.97 If, however, the taxpayer produces credible evidence supporting the theft characterization and the year of deduction as the correct year, the burden shifts to the Service to prove otherwise under IRC 7491.98 Credible evidence for purposes of IRC 7491, is evidence of a quality such that, after critical analysis, the court would find the evidence sufficient upon which to base a decision on the issue if no contrary evidence were submitted (without regard to the judicial presumption of IRS correctness).99 Application of the foregoing standard does not require the court to accept testimony the court fails to find credible. A tax court is not compelled to believe evidence which to it seems improbable, or to accept as true uncorroborated evidence of interested witnesses even though uncontradicted.100 Under IRC 7491, taxpayers who can only offer their own testimony regarding their subjective belief that pursuit of litigation against the perpetrator would have been useless will likely fail to shift the burden to the Service on the issue of whether there is a reasonable likelihood of recovery.101 Subjective belief regarding the fruitlessness of retaining an attorney will also likely fail to sustain the taxpayers burden, particularly when the taxpayer files suit after the year in which the deduction is taken.102 On the other hand, taxpayers who actively monitor the bankruptcy proceedings of the fraud perpetrator, testify as to the bleak prospects for any financial recovery, and offer other corroborating evidence of the unlikelihood of recovery from the bankruptcy estate or otherwise will have a greater chance of shifting the burden of proof to the Service.103 A Portion of a Loss Determined, With Reasonable Certainty, to be Non-Recoverable Is Deductible Notwithstanding the Existence of Pending Claims or Litigation as to the Remaining Loss. Pursuant to the applicable Treasury Regulations, a taxpayer is not required to wait until final recovery or resolution with respect to a claim or claims before taking a theft loss deduction for that portion of the loss that is unrecoverable. If in the year of the casualty or other event a portion of the loss is not covered by a claim for reimbursement with respect to which there is a reasonable prospect of recovery, then such portion of the loss is sustained during the taxable year in which the casualty or other event occurs.104 The cited regulation then uses, as an example, the total loss of an automobile because of anothers negligence to show how a loss might be trifurcated for purposes of deductibility. In year 1, the year of the auto accident, a total loss of 5000 occurs, which represents the taxpayers adjusted basis or cost in the auto. Because the taxpayer sues the driver who caused the accident, the loss is not deductible in year 1. In year 2, a judgment is received for 4,000 thus, a 1000 deduction is allowed in year 2. In year 3, it becomes reasonably certain that only 3500 can ever be collected on the judgment thus, an additional 500 is deductible in year 3. 105 Notwithstanding the direction provided by the cited regulation, the Service took a contrary position in a relatively recent case, Johnson v. United States . 80 Fed. Cl. 96, 2008-1 U. S.T. C. 50,142 (Cl. Ct. 2008), contending that the taxpayers in that case were not entitled to a theft loss deduction for any portion of their 78 million loss until all of the many lawsuits filed seeking to recover the loss had been resolved. The court rejected this position, stating as follows: The government reads the phrase no portion of the loss to mean that the regulation Treas. Reg. 1.165-1(d)(2) requires that a taxpayer refrain from taking any portion of a theft loss deduction until the taxpayer had determined exactly how much of the entire loss the taxpayer will recover. The governments reading. is not supported by the examples contained in Treas. Reg. 1.165-1(d)(2)(ii). Contrary to the governments contention, the plaintiffs were not required to wait until the total amount of recovery from every source was established to take a theft loss deduction for a portion of their loss. Identidade. at 199-120. Thus, notwithstanding pending lawsuits against a myriad of third parties for recovery of portions of the losses sustained, the taxpayers were permitted to deduct that portion of the loss that was determined, with reasonable certainty, to be nonrecoverable prior to resolution of all of the pending litigation. The Defrauded Taxpayer or Theft Victim is Not Required to File Litigation Against the Perpetrator as a Prerequisite to Taking a Theft Loss. An issue apparently infrequently litigated, but nonetheless pertinent, is whether a theft victim must pursue recovery from the perpetrator or other third parties prior to taking a theft loss. The answer appears to be no. The court in Bromberg . 232 F. 2d 107, pointedly rejected the Services contention that the taxpayer, a victim of swindling, could not take a theft loss until he satisfied his burden of showing that he tried, but failed, to recover his losses, stating as follows: The statute makes no such requirement, and when the nature of the matter dealt with, thieving and thievery, is considered, it seems clear, we think, that only if there were a specific provision imposing this requirement, would a court be authorized to hold that it exists.106 The treasury regulations under IRC 165 further support the lack of an obligation on the part of the taxpayer to initiate or file a lawsuit against the perpetrator or third parties for recovery of a theft loss. Treasury Regulation 1.165-1(d)(2)(i) includes in a listing of examples of possible, non-exclusive bases for determining, with reasonable certainty, that there is no reasonable prospect of recovery the release or settlement of a claim and the abandonment of a claim. Presumably, if a claim can be abandoned, a claim for recovery need not be filed. As the court in Kaplan v. U. S. stated: The mere existence of a possible claim or pending litigation will not alone warrant postponing loss recognition instead, the inquiry should be directed to the probability of recovery as opposed to the mere possibility.107 Nonetheless, where there is a probability (versus a mere possibility) of some recovery, it would behoove a taxpayer to pursue recovery, given the facts-and-circumstances nature of the tests applied to determining whether there has been a closed and competed transaction for purposes of claiming a theft loss. It should also be noted that for traditional theft cases, not involving investment transactions, there is a clear, statutory requirement to file an insurance claim when the loss is covered by insurance. Under that circumstance, a timely insurance claim must be filed or the deduction of the loss will be denied to the extent covered by insurance.108 The excesses of the past few years have seemingly culminated in a wave of fraudulent schemes, from Enron, to WorldCom, to Ponzi schemes and Wall Street firm debacles. Regulators have admitted to less-than-diligent enforcement of laws intended to protect public investors. Little, however, has been done to compensate the investing public who placed their trust, their confidence, and their lifelong earnings in a capital and financial system touted as the soundest in the world. Yet, many of these investors have lost their lifelong earnings to intentional fraud, whether through direct investments with the perpetrators of the fraud or through brokers who recommended the fraudulent investments, or on the open market often in reliance upon fraudulent financial statements and projections. For these investors, deducting their losses as capital losses from investing in arrangements or companies later found to have committed fraud provides little relief. And, deducting these losses as theft losses resulting from fraud, deceit, or other forms of guile as theft under the applicable local law has been fraught with ambiguity as to the correctness of the position, particularly given the highly fact-intensive nature of the theft characterization and the timing of the deduction. Fortunately, for certain victims of Ponzi schemes, the Service has issued Revenue Procedure 2009-20, sanctioning theft loss treatment for qualifying investors in a Ponzi scheme and establishing a bright line test for determining when to take most (either 95 or 75) of the loss as an ordinary, theft loss deduction. At the same time, the Service issued Revenue Ruling 2009-9, putting to rest the question whether theft losses in the context of investment transactions were subject to the limitations on other kinds of casualty losses. The hope is that Revenue Procedure 2009-20 and Revenue Ruling 2009-9 are evidence of more to come in the way of a recognition by the Service of the theft-like nature of investment fraud and the right of taxpayers to treat the losses as such rather than as capital losses. Less focus on privity and more focus on the role issues of reliance, intent, and causation play in the context of investments purchased on the open market would be welcomed, as would clearer guidance on the facts and circumstances material to determining when a loss can be determined, with reasonable certainty, to be non-recoverable. Until then, outside the safe harbor of Revenue Procedure 2009-20, the characterization of an investment loss as a theft loss and the timing of the deduction of that loss will require an extraordinary degree of care. Prudent attention to supporting the characterization of the investment loss as a theft loss and the timing of the theft loss deduction with credible evidence will place the burden upon the Service to support any disallowance of the deduction under IRC 7491. 1 Coleman Law Firm, Jeffrey P. Coleman, Esq. 581 South Duncan Ave. Clearwater, FL 33756, ColemanLaw. A portion of this chapter will be published, in substantially the same form, by The Florida Bar in a forthcoming issue of The Florida Bar Journal. 2 Jeffrey P. Coleman is the President and shareholder of Coleman Law Firm, a firm established in 1997. He is also a member of the Public Investors Arbitration Bar Association (PIABA) with years of experience representing defrauded investors in securities-related arbitration or litigation and in advising them on certain tax-related issues. He can be reached at 727-461-7474 or by email at jeffcolemanlaw. Jennifer R. Newsom is an associate attorney with Coleman Law Firm. She received her law degree, cum laude, from The University of Toledo College of Law and her Masters of Law (LL. M.) in Taxation from The University of Florida. 6 Bromberg . 232 F. 2d at 110-111(emphasis added). 8 MTS International, Inc. v. Commissioner . 169 F. 3d 1018, 1021 (6 th Cir. 1999) Bromberg . 232 F. 2d at 111. 9 Nichols v. Commissioner . 43 T. C. 842, 884-885 (1965)(emphasis added). See also Vincentini v. Commissioner . 96 T. C.M. 400 (CCH), 2008 WL 5137345, at 4 -5(Dec. 8, 2008)(A violation of a Federal criminal statute may also establish that a theft occurred for purposes of section 165.) 10 Marr v. Commissioner . 69 T. C.M. (CCH) 2837, 1995 WL 350895, at 3 (June 12, 1995). 11 2008 WL 686354 (March 14, 2008). 12 Id . (citations omitted). 13 Revenue Ruling 71-381, 1971-2 C. B. 126 is obsolete as the result of Rev. Rul. 2009-09 to the extent that it finds theft losses associated with transactions entered into for profit deductible under 165(c)(3) rather than 165(c)(2). 14 CCA 200811016 (emphasis added). 17 See, e. g. . Cal. Penal Code 584. 18 Vietzke . 37 T. C. at 510-511. 20 Jeppsen, 70 T. C.M. (CCH) 199 (1995) affd 128 F. 3d 1410 (10 th Cir. 1997) . 22 Bromberg . 232 F. 2d at 110-111. 23 See e. g . Rev. Rul. 77-18 (theft loss from stock exchanged pursuant to merger in reliance on false statements and representations regarding merged companys financial condition). 24 Rev. Rul. 71-112, 1972-1 C. B. 60. 25 Hall v. GE Plastic Pacific PTE LTD . 327 F.3d 391, 396 (5 th Cir. 2003). 26 See 47 Am. Jur. 2d Judgments 464 (2006). 27 Vincentini . 96 T. C.M. (CCH) 400, 2008 WL 5137345, at 5 (2008). 29 Id . The taxpayer in Vincentini, 2008 WL 5137345 lost on the issue of the timing of his theft loss deduction. He failed to establish that, in the year that he took his deduction, he was without a reasonable prospect of recovery. 30 2009-14 I. R.B. 749, 2009 WL 678785 (March 17, 2009) 31 Rev. Proc 2009-20, Section 7. 32Rev. Proc. 2009-20, Section 4.01. 33 See Rev. Rul. 2009-9, 2009-14 I. R.B. 735 (citing Bromber g s broad definition of theft). 34 Rev. Proc. 2009-20, 4.02. 35 Rev. Proc. 2009-20, 4.03. Presumably, investors who invested in Ponzi schemes through flow-through entities would be able to benefit from a pass-through of a theft loss deduction, a topic beyond the scope of this column. 36 This discovery rule puts theft losses on par with casualty losses, as a theft loss from, for example, fraud, might not be discovered until years after the actual wrongdoing. See Ramsay Scarlett amp Co. v. Commissioner . 61 T. C. 795, 808-812 (March 25, 1974). 38 Treas. Reg. 1.165-1(d) Johnson v. U. S. 80 Fed. Cl. 96, 119-121 (2008). 39 Rev. Proc. 2009-20 at Section 4.04. 41 Excluded from the definition of potential third-party recovery, are actual or potential claims against various sources of recovery, including (i) the investors insurance company, (ii) the Securities Investor Protection Corporation (SIPC), (iii) other entities or parties contractually bound to cover the loss, (iv) the perpetrators of the fraud, and (vi) receiverships or similar arrangements established with respect to the perpetrators of the fraud. Id . at 4.10. Thus it is possible to pursue claims against the foregoing excluded sources and still deduct 95 of the qualified investment, subject to reductions for actual recovery and potential insurance or SIPC recovery. 43 Rev. Proc. 2009-20 at 5.02. 44 See also Revenue Ruling 2009-9 for issues relating to the taxpayers basis, the availability of a 3, 4, or 5 year net operating loss carry back for qualifying 2008 theft losses, among other related issues. 45 Rev. Proc. 2009-20 at 5.03. 46 One gift from the Service to defrauded investors who either do not elect or qualify for safe harbor treatment is the Services newly pronounced position on phantom income. Phantom income is income reported as income by the fraudulent arrangement, but not income in reality because the monies labeled income were derived from other investors and not from a return on the investment. If a defrauded taxpayer included the phantom income in income for purposes of federal taxes, the amount included will increase the taxpayers basis in the amount allowable as a theft loss. Id . at 8.02. 47 See, e. g . Vincentini v. Commissioner. 96 T. C.M. 400 (CCH 2008) Stoltz v. U. S. 410 F. Supp. 2d 734, 742 (S. D.Ind. 2006). 48 See, e. g . Revenue Ruling 2009-9(For federal income tax purposes, theft is a word of general and broad connotation, covering any criminal appropriation of anothers property to the use of the taker, including theft by swindling, false pretenses and any other form of guile.) Treas. Reg. 1.165-8(d)(providing that the term theft shall be deemed to include, but shall not necessarily be limited to, larceny, embezzlement, and robbery). 49 DeFusco . 38 T. C.M. 920. The Tax Court, nonetheless, denied the theft loss deduction as to the option stock for the year in which it was claimed based on the possibility of recovery from the claim filed by the taxpayer in Equity Fundings bankruptcy proceeding and possible legal actions against responsible third parties. 50 DeFusco 38 T. C.M. 920. The Tax Court, nonetheless, denied the loss for the year in question because the taxpayer (unlike in this case) had a reasonable prospect of recovery as to his stock. The Tax Court also upheld the IRSs denial of a theft loss for stock the taxpayer had acquired other than through exercise of his options under his employee stock option plan with his employer, Equity Funding 52 See, e. g. . Paine v. Commissioner . 63 T. C. 736 (1975)(finding applicable state law to require fraudulent misrepresentations to have been made with specific intent of appropriating taxpayers property) Singerman v. Commissioner . T. C. Summ. Op. 2005-4 (Jan. 5, 2005)decided under IRC 7463(b) and thus not precedential(finding applicable state law to require intent of defrauder to obtain victims property for himself and, thereby, to implicitly require a relationship of privity). 56 See notes 48-50 supra and accompanying text. 57 Treas. Reg. 1.165-1(b). 58 See Shepherd v. Commissioner . 283 F.3d 1258, 1261 (11 th Cir. 2002). The reluctance to allow the use of substance over form by taxpayers in the context of transactions stems from concerns that taxpayers will be unjustly enriched and the Service will be whipsawed between one party claiming taxation based on the form, and the opposite party claiming taxation based on the substance. Estate of Durkin v. Commissioner . 99 T. C. 561, 575 (1992). 60 See Taiyo Hawaii Co. Ltd. v. Commissioner . 108 T. C. 590, 602 (1997)(recognizing availability to taxpayers of substance over form, but rejecting its application to taxpayer seeking to treat debt as equity). 61 Id . at 511-512 (emphasis added). 62 Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. dated March 31, 2003 (Investigative Committee Report), at 1, 5, amp 6 (emphasis added). 63 Investigative Committee Report at 33 (emphasis added). 64 IRS Notice 2004-27. 68 Id . at 742-743(emphasis added)(citations omitted). 69 MTS International, Inc., 169 F. 3d at 1022. 71 Id. But see Electric Picture Solutions, Inc. v. Commissioner . 96 T. C.M. (CCH) 146, 2008 WL 4132050, at 2 (2008)(noting that generally a taxpayer cannot support a theft under California law for stock purchased on the open market because there is no privity between the perpetrator and the victim)(citing Marr v. Commissioner . T. C. Memo 1995-250, DeFusco v. Commissioner . T. C. Memo 1979-230)(other citations omitted). 72 See Rev. Rul. 2009-9 (March 17, 2009)(noting losses from stock purchased on open market are capital losses rather than theft losses because the officers or directors did not have the specific intent to deprive the shareholder of money or property). 73 Treas. Reg. 1.165-1(d)(1). 75 See Ramsay Scarlett amp Co. v. Commissioner . 61 T. C. 795, 808-812 (1974)(finding purpose of 165(e) to neutralize discovery problems associated with theft loss and place on par with other casualty losses). 76 Ramsay Scarlett amp Co. v. Commissioner . 61 T. C. at 811. 77 Treas. Reg. 1.165-1(d)(3)(emphasis added). 78 Treas. Reg. 1.165-8(a)(2). 79 Treas. Reg. 1.165-1(d)(2). 80 Treas. Reg. 1.165-1(d)(2)(ii). 81 Treas. Reg. 1.165-1(d)(2)(i). 82 See, e. g.,Wisnewski v. U. S . 79-2 U. S.T. C. 9496 (N. D. Tex. 1979)(finding taxpayers 1968 theft loss was improperly taken in 1972, notwithstanding that earlier year was time-barred) Korn v. Commissioner . 524 F. 2d 888 (9 th Cir. 1975)(finding theft loss time-barred because taken years after year in which loss sustained pursuant to Services determination). 84 See IRS ILM 200547001 (Nov. 25, 2005). 85 Treas. Reg. 1.165-1(d)(2)(i) (emphasis added). 86 IRC 165(e) Rev. Proc. 2009-20, Section 4.04. 87 Kaplan . 2007 WL 2330841, at 8. 89 Rev. Proc. 2009-20, Sections 4.06 and 8.02. 90 Ramsay Scarlett amp Co. v. Commissioner . 61 T. C. 795, 811 (1974)(citations omitted)(emphasis added) Vincentini v. Commissioner . 96 T. C.M. (CCH) 400, 2008 WL 5137345, at 7 (2008) Kaplan . 2007 WL 2330841, at 6 . 91 Ramsay Scarlett amp Co . 61 T. C. at 811. 92 Jeppsen v. Commissioner . 70 T. C.M. (CCH) 199 (1995)(citations omitted). 93 Jensen . 66 T. C.M. (CCH) 543 (citations omitted)(emphasis added). 94 See Id . (citing Jeppsen v. Commissioner . 128 F. 3d 1410, 1418 (10 th Cir. 1997), Ramsay Scarlett amp Co. Inc . 61 T. C. at 811, United States v. S. S. White Dental Mfg. Co . 274 U. S. 398, 402-03 (1927)). 95 Jeppsen v. Commissioner . 128 F. 3d 1410 (citations omitted). 96 Kaplan . 2007 WL 2330841, at 6 (citations omitted). 97 Jeppsen v. Commissioner . 128 F. 3d 1410 (citations omitted) Vincentini . 96 T. C.M. (CCH) 400, 2008 WL 5137345, at 4. 98 Note that the benefits of IRC 7491 are available provided that the taxpayer has properly maintained required records, is able to substantiate items of income reported and deductions taken as required by the IRC, and has cooperated with requests by the Service for information. 99 Blodgett v. Commissioner . 394 F. 3d 1030, 1035 (8 th Cir. 2005). 101 See Vincentini . 96 T. C.M. (CCH) 400, 2008 WL 5137345, at 7-8 (finding taxpayers testimony that he chose not to hire attorneys because he thought it was a waste of money and lack of testimony regarding his status under a restitution order insufficient support for the year in which the taxpayer chose to deduct his theft loss). 102 See Ramsay Scarlett amp Co . 61 T. C. at 812-813 (finding taxpayers deduction of embezzlement loss in year it was discovered unsupportable in view of taxpayers retention of experienced attorney for thorough study of law related to the potential filing of claims against perpetrator and third parties) Jeppsen . 128 F. 3d 1410 (finding taxpayer failed to support year in which theft loss deduction taken, given that taxpayer later retained attorney and pursued claim in securities arbitration against defendants with sufficient assets in relation to amount of claim) 103 See Bubb v. United States . 93-2 USTC (CCH) 50,572, 1993 WL 476193 (W. D. Pa. 1993)(finding taxpayers deduction of theft loss from fraudulent investment scheme taken in year of discovery to be correct year, given testimony of taxpayers who actively monitored perpetrators bankruptcy proceedings, testimony of chair of creditors committee regarding the unlikelihood of recovery beyond a few cents on the dollar, and similar testimony from attorney for the committee of unsecured creditors). 104 Treas. Reg. 1.165-1(d)(2)(ii). 106 Id . at 111. See also Vietzke v. Commissioner . 37 T. C. 504, 510 (1961)(refusing to find requirement that taxpayer move against the thief in order to obtain benefits under IRC 165). 107 Kaplan . 2007 WL 2330841, at 6 (M. D. Fla. 2007)(citations omitted). 108 IRC 165(h)(4)(E).The cited section applies only to casualty losses, including theft losses, falling under IRC 165(c)(3). As previously noted, the Service took the position in Revenue Ruling 2009-9 that losses from investments are losses incurred in connection with transactions entered into for profit, which fall under IRC 165(c)(2) and, as such, they are not subject to the special limitations and rules of 165(h) governing losses falling under IRC 165(c)(3). For more information about Securities fraud, or estate planning, particularly if you are in Clearwater, Palm Harbor, Tarpon Springs or the Tampa Bay, Florida area, go to our website colemanlaw Share this entry colemanlawwp-contentuploads201512logo. png 0 0 Jeff Coleman colemanlawwp-contentuploads201512logo. png Jeff Coleman 2010-11-30 22:13:47 2010-11-30 22:13:47 IRS LOSS TREATMENT FOR CERTAIN INVESTMENT LOSSES Coleman Law Firm: Clearwater Securities Litigation Attorney