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vquirk

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Reply with quote  #1 
Hi everyone;

Like most, if not all, of the people here now, I have taken a beating from the crooks at Bullion Direct.  I assume that the silver I purchased and the cash I had in my account is gone.  I've filed complaints with my state (Massachusetts) attorney general as well as the Texas' AG.

So now on to the recovery.   I'll join any class action lawsuit, although the lawyers get most of the money in class action suits, I think. 

Anyway, does anyone know if these losses are tax deductible?  I bought silver and essentially sold it for $0 since it was stolen by the BD thieves.  Isn't this a capital loss?  What about the cash that was in my account?

Thanks in advance.
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JG

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Reply with quote  #2 
Quote:
Originally Posted by vquirk
Anyway, does anyone know if these losses are tax deductible?  I bought silver and essentially sold it for $0 since it was stolen by the BD thieves.  Isn't this a capital loss?  What about the cash that was in my account?


This one gets EXTREMELY complicated. Tulving was a simpler situation in most regards (no cash on account, no stored metal), and was quite complicated. Here is what I summarized for Tulving:

Quote:

The summary (remember, I have no accounting, legal, or other similar background): you should be able to deduct the calculated loss on your 2014 tax return, either as a capital loss (the safe way) or as a theft loss (a better deduction and likely OK to take, but high audit potential). The amount to deduct can either be your loss minus the amount expected to be recovered as of December 31, 2014, or your loss minus the amount currently expected to be recovered (if more). I do not feel qualified to make a determination as to those numbers; the Chapter 7 Trustee would likely be in the best position to do so.


It depends on things like whether a theft occurred, whether criminal intent was there, there are 10% and $100 deductions that likely do not apply but most people think do, etc.

I have a page at http://about.ag/TulvingTax.htm that covered some of the information regarding the Tulving tax situation (remember, that was *different* although similar in a number of ways, and not all creditors will have identical tax treatment due to whether or not metal was stored, cash was on account, etc.).

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BDistheBestest

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Reply with quote  #3 
Thanks guys - this is an important point!  If we can't recover any of our money, at least we can recover some via the tax write-off.
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charliem

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Reply with quote  #4 
I looked into this a bit already.  I believe the best choice (me anyway) will be to take the loss as a "bad debt".  This has a lower AGI threshold of 2%.  This is treated as a short term loss.  So, you need short term gains for the loss to offset.  You can take $3,000 dollars a year of short term loses against plain income and carry over the remaining loss to subsequent tax years.


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charliem

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Reply with quote  #5 
I should point out that you are required to provide documentation of the loss and what you did to recover it.  So, gather your information, and report to the BBB and Texas AG when you are ready (I am waiting until after the 6 weeks the CEO stated to give him the benefit of the doubt).

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vquirk

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Reply with quote  #6 
I did a little more research on the topic.  IRS Rev. Proc. 2009-20 may be applicable.
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JG

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Reply with quote  #7 
Quote:
Originally Posted by vquirk
I did a little more research on the topic.  IRS Rev. Proc. 2009-20 may be applicable.


For those that are unaware, IRS Rev. Prov. 2009-20 deals with Ponzi schemes. Many people felt that what happened at Tulving was a Ponzi scheme (e.g. money from new orders paying for old ones), but neither Tulving nor Bullion Direct meet the traditional definition of a Ponzi scheme (where investors intentionally let someone hold on to their cash, to generate a promised return).

I do not believe it would not apply here. Here it what I wrote for Tulving (you can substitute "Bullion Direct" for "Tulving", and I believe the same applies):

---

Does the Ponzi Safe Harbor Apply Here?

No, as far as I can tell.

Specifically, in my opinion, this does not meet the normal (or IRS) definition of a Ponzi scheme. A Ponzi scheme involves someone holding money for an investor, with the promise of interest being paid. Customers never intended for The Tulving Company to hold their money (beyond the time required to provide the metal), and I think it is safe to say that The Tulving Company never offered or paid any interest. Rev Rul. 2009-14 and Rev Proc. 2011-58 both require an indictment or criminal complaint, neither of which has occurred in this case.

The Safe Harbor rules specify among other things that the "lead figure" receives cash or property *and* purports to earn income for the investors *and* reports income that is ficticious *and* pays out some income. It also requires that the lead figure be charged with a crime (as opposed to a standard Theft Loss, which does not require criminal charges). At least as of this writing (and the end of 2014), there was nothing suggesting that any criminal charges had been filed (just investigations).
---


JG

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dreamer

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Reply with quote  #8 
Hi All. Since i have heard little or nothing from our friends at BD on our little drama, I thought I  had better look into tax losses for maybe a little help. I am not a tax expert but have done my own for 60 years. I scoured the tax laws and to my feeble brain there is no doubt that non-business theft losses must be claimed as deductions. Poor me, I wasn't in the silver business, I just wanted to buy a little silver. OK. After I applied the $100 rule and the 10 percent AGI rule I figured I owed our friendly alleged thief another $5K just to break even. Now we are dealing with two alleged thieves.

If anyone out there can find a better legal way to get some of our money back, now is the time to step forward. Otherwise, water-boarding anyone....just dreaming.

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robertmbeard

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Reply with quote  #9 
As usual, if you get 7 different IRS tax agents to address this question and your individual tax return, you will get 7 different answers. 

My personal choice is not to claim anything on my 2015 tax return.  After final legal resolution from the US Bankruptcy Court and/or federal prosecutors, I will either claim a capital loss or theft loss on my 2016 tax return or on an amended 2015 tax return.

Another option is to "estimate" a capital loss or theft loss on your 2015 tax return and then later file an amended 2015 tax return when there is final legal resolution and exact loss numbers.  For capital losses, in general, you do not have a "realized capital loss" until you sell your investment (final resolution).  For theft losses, in general, you would claim a theft loss in the year of the theft, after legal confirmation of theft (along with enough paperwork to prove it...). 

Then, there are those (I waffle slightly on this...) who consider bullion as currency and not as a commodity investment.  As such, they do not want to report any ownership or losses of bullion to the Feds, for fear that the Feds will later steal their gold/silver bullion, like FDR did during the Great Depression... 

Good luck to us all...
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harley_52

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Reply with quote  #10 
Quote:
Originally Posted by robertmbeard


My personal choice is not to claim anything on my 2015 tax return.  After final legal resolution from the US Bankruptcy Court and/or federal prosecutors, I will either claim a capital loss or theft loss on my 2016 tax return or on an amended 2015 tax return.



That's my plan.  At this point, it's impossible to establish the amount of your loss since we don't know what, if anything, we will recover through the bankruptcy process.
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gyro

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Reply with quote  #11 
Quote:
Originally Posted by robertmbeard
My personal choice is not to claim anything on my 2015 tax return.  After final legal resolution from the US Bankruptcy Court and/or federal prosecutors, I will either claim a capital loss or theft loss on my 2016 tax return or on an amended 2015 tax return.
And yet 2016 has passed by now, and still no resolution...  Chucky fled TX and is freely on the lam, probably in Auburn, AL.

Motherchucker filed for bankruptcy on 7/20/2015.  So, if we were to deduct our loss as a casualty loss (loss on deposit due to bankruptcy), why would we have to wait for a final court verdict?  Our money is gone and Chucky has already filed for bankruptcy over a year ago.  That seems to fulfill the criteria for a casualty loss due to bankruptcy alone.
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robertmbeard

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Reply with quote  #12 
The federal investigators and bankruptcy court have failed miserably on this case.  If a prosecution and conviction had occurred, you could file an amended 2015 tax return, claiming a theft loss on the bankruptcy filing date of July 20, 2015.  If a final bankruptcy settlement had occurred, you could file either a capital loss (easiest) or casualty loss on your 2016 tax return.  Instead, the bankruptcy settlement in June 2016 put us in limbo, as part of a creditor trust, waiting for Chucky's Mom to start a new business (no later than 6 months after closing on the sale of the software platform, if I remember correctly...) and slowly pay royalties to the creditors.  So, we still don't know what to claim for our capital loss, since it may be zero (very likely) or 1%, 2%, etc... 

Options, as I see it:
1)  Don't claim anything yet (safest choice, since the IRS treats you guilty if you run afoul of the confusing, contradictory tax code...)
2)  Claim a total capital loss in 2016, as of the June bankruptcy court settlement date, where you basically record that you don't expect to ever get anything from Chucky's Mom.  If you later do, it becomes a capital gain (maybe) relative to your zero basis (for tax purposes) in a subsequent tax year.
3)  Guess what you think your recovery will be (likely no better than 1%, after all lawyer fees are paid...) and use that to calculate your capital loss, as of the bankruptcy settlement of 2016.  One complication here is if you have a class 4 claim in addition to the more common class 5 claim.  Since class 4 claims take payout preference, you have better chance of more recovery for it.  So, that complicates the guesswork on what you might get back.

Whatever you choose to do, good luck!  Remember, the IRS will treat you as guilty until you prove your innocence, while Chucky gets to walk free despite his crimes!
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