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Junior Member
Posts: 9
Reply with quote  #1 

I waited through 2016 thinking there may be some direction or resolution on the bankruptcy, but that didn't happen. I want to report this as a capital loss on my 2016 tax return, but have a few questions. I know any advice is just that, and won't be taken as legal tax advice. I did read the posting on this forum on capital loss versus theft. But still have questions.

Schedule D is where normal losses are reported. But it seems like form 8949 is required in this case, since no 1099's were sent to the IRS to document the loss. Any thoughts on what form(s) to use to report as a capital loss versus theft? And do I need to explain the loss up front, or wait for a possible audit or inquiry?

I placed 3 orders which were not fulfilled, but for which money was taken from my account. I also requested a cash withdrawal for the remaining balance in my account which I didn't receive. All of this was prior to BDI filing bankruptcy.

Since I never received any of the metal I ordered, I'm reluctant to itemize the loss as owning X ozs. of metal that's now worth $0. Because the IRS knows that .999 fine gold is not worth $0. From my viewpoint, I never had any metal, and it was my money that was stolen. Therefore, I think it should be reported as a loss of cash rather than the metal itself. I'm not sure you can consider stolen money as a capital loss. Unless there's a legal technicality that says I owned the metal when ordered even though I never received it. 

Has anyone else thought about the mechanics of reporting their loss on their 2016 tax filing? I don't want to do anything that will raise a red flag and trigger an audit.




Posts: 55
Reply with quote  #2 
You bring up some interesting points as to what form can or can't be counted as a loss and if it's a loss or theft. If you have a substantial amount of money involved, I'd pay for some expert tax help on this one and let them worry about an audit if it happens at their expense. Your right in wanting to know which way you can file and which way might be of greater benefit to you. I was able to find numerous places that provided the exact same detailed information as to exactly what has to be done to conduct a like kind trade, how the money had to be handled and in what sequence so the IRS would not disallow it if they found out about the trade. If you can find that same consistent information on the web detailing your exact situation based on IRS rules that are copied on the web, then you could just do this yourself and not worry about it, as long as the rules haven't changed for the current filing year!!! 

I wouldn't fear an audit as long as you know you've submitted the correct information on the right form. The IRS doesn't hire a boatload of CPA's to audit our returns, they are just regular people trained to do a job and when they run into something they can't figure out, many of them don't bother asking for help, they just send out and audit letter. You call the number on the letter and explain what your doing and why and they will take it up from there with someone that does understand it if they can't.
That's what happened to me, it took a day or so before she called back as I remember and she said it was all cleared up, case closed. A $37,000 1099B was no longer a problem that they shouldn't have received in the first place dealing with a like kind trade.
The point is, no matter if you submit the correct information, that does not mean you will not get an audit letter. Your correct in worrying about doing this the correct way, but don't worry about the audit, it's a crap shoot for everyone based on who ends up with our returns if there is anything other than the standard information on it. You may be asked to provide supporting documents that haven't already been submitted as part of a routine audit that doesn't have anything to do with the accuracy of your filing.

How often do people submit the transactions from a like kind trade on their income tax return when it's not necessary unless your dealer screws you and submits a 1099B for the sales part of that transaction. APMEX APMEX APMEX!!!!

Posts: 65
Reply with quote  #3 
I get the point that even tho we may have intended to purchase PM, at this point the cash was used for other purposes (stolen) and we are potential investors in a new business that is probably worthless.

It would be nice to receive final filings but I haven't received any documentation within the year.

I'm leaning towards a cash investment in year X with total loss in year Y.

Is there a 1099 INT/DIV to go with it?  No.

Was a cash transaction gone bad.


Junior Member
Posts: 27
Reply with quote  #4 
Great question!
You can only deduct losses not reimbursed or reimbursable by insurance or other means. You'll need to subtract $100 from each casualty loss of personal property. The total of your casualty and theft losses on personal property must be more than 10% of your adjusted gross income (AGI). Otherwise, you can’t claim a deduction for that portion of the loss above the limit.

Deductible casualty losses can result from events like:
Loss on deposits when a bank or other financial institution becomes insolvent or bankrupt. If you incurred this type of loss, you can deduct it as one of these:
  • Casualty loss
  • Ordinary loss
  • Nonbusiness bad debt
the portion of the loss not covered by insurance, like a deductible, isn't subject to this rule. To learn more, see Publication 547: Casualties, Disasters, and Thefts at http://www.irs.gov.

A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be:

  • Illegal under the law of the state where it occurred
  • Done with criminal intent
You should prove a casualty caused your loss. So, keep newspaper accounts and other proof showing the type of casualty that struck your area and the amount of damage it did.
You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. The choice generally is made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. If you treat the loss as a casualty or ordinary loss, you can't treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Once you make the choice, you can't change it without permission from the Internal Revenue Service.

Casualty loss proof.  For a casualty loss, you should be able to show all of the following.
Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.
Theft loss proof.   For a theft loss, you should be able to show all of the following.
Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.
 IF you choose to report the loss as a(n)... THEN report it on...
casualty loss Form 4684 and Schedule A 
(Form 1040).
ordinary loss Schedule A (Form 1040).
nonbusiness bad debt Form 8949 and Schedule D (Form 1040).
So, since BD wasn't FDIC-insured, and unless maybe your bank/credit card offered some awesome purchase protection - I'm guessing we would report it as a casualty loss (loss on deposit).  Because the other options would be as an ordinary loss (not sure what difference that would make?) or a theft loss (would have to prove criminal intent).  Either way, no claim for reimbursement exists with a reasonable expectation of recovery.

So, I guess this would just be reported as a total loss.  And, I presume at the current market value, not our initial purchase price?
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