5 ms·

Yep, talk to a CPA. One key issue is you may not have a capital loss, but rather a casualty, which by my read of the flowchart becomes a miscellaneous itemized

by patio11 13y ago

Yep, talk to a CPA. One key issue is you may not have a capital loss, but rather a casualty, which by my read of the flowchart becomes a miscellaneous itemized deduction. Those are limited to 2% of MAGI and I don't believe they carry over. Also, there is a hard cap at $20k for lost deposits. See publication 547. It may be to your advantage to file it under a loss to personal property (form 4648) - the math isn't straightforward for me to work out. Talk to a CPA. This is the sort of thing they live for.

wtvanhest 13y ago
It may depend on why the exchange went insolvent. If it is not a technical problem, and is rather a Ponzi Scheme, the tax implications may be much different since there are IRS rules that handle Ponzi Schemes. Additionally, those that gained profits in the exchange may be required to pay back those profits to victims through clawback lawsuits+. This IRS link below is a brief overview of how victims of Ponzi Schemes are treated. The most important piece of information is that there is a real chance of a clawback for the people who withdrew and currently think they made money. http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-Schemes http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-... I don't have time to read these documents this morning, but I do know that the people who received returns from Madoff are now the focus of lawsuits. Here is a Forbes article on the subject, there are plenty more you can read out there as well: http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/ http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-s... Here is one example of a hospital having to pay a Clawback. http://www.jewishpress.com/news/breaking-news/hadassah-doctors-strike-over-hospital-deficit-fallout/2014/02/05/ http://www.jewishpress.com/news/breaking-news/hadassah-docto... +My guess is that the clawback lawsuits would yield very little real money since much of the value of Bitcoined gained was due to price appreciation which may keep lawsuits against those who gained fairly minimal since there isn't much money for lawyers to sue for in complex litigation.
- zAy0LfpBZLC8mAC 13y ago
  Noone was promising any returns, so how could this possibly be a ponzi scheme?
  - deleted 13y ago
    [deleted]
  - gamblor956 13y ago
    A Ponzi Scheme is legally defined as a fraudulent investment operation that pays earlier investors returns out of the investments of subsequent investors. A promise of returns is not necessary.
    - zAy0LfpBZLC8mAC 13y ago
      Well, and how is "give us your money and you'll later get it back, just minus some fees" possibly an investment operation, be it fraudulent or not? I mean, where did MtGox ever suggest they would pay any returns, let alone where did they ever pay returns?
      - wtvanhest 13y ago
        You bring up an interesting point. I reviewed a wiki list of Ponzi schemes and assuming that is an exhaustive list I have to agree with you that the generally accepted definition is that you must say you are doing something with the money to benefit the investors for it to be a 'Ponzi Scheme'. http://en.wikipedia.org/wiki/List_of_Ponzi_schemes http://en.wikipedia.org/wiki/List_of_Ponzi_schemes The fact that it doesn't fit the wiki or generally accepted definition of a Ponzi Scheme does not rule out the possibility that it still may be considered one but after spending some more time considering it, it does not look like a true Ponzi Scheme, even if the CEO did directly steal the money and use new money to pay old BTC buyers.
        zAy0LfpBZLC8mAC 13y ago
        Well, what pretty much rules out that MtGox will be considered a ponzi scheme is that if it were, "ponzi scheme" would essentially be a synonym for "fraud". Suppose MtGox wasn't a bitcoin exchange, but rather sold cars, which had to be ordered and paid for in advance. Now, suppose further that the CEO "stole" cars from the company and then bought new ones using the money from new customers when he needed to deliver a car to one of the earlier customers. That's just plain old fraud, not a ponzi scheme, and it doesn't become a ponzi scheme just because it's money instead of cars - and in particular, you as an earlier customer certainly are not liable for the losses of later customers. edit: I mean, MtGox under the assumption that the loss was not due to a technical problem, if it way due to a technical problem, it's obviously not a ponzi scheme anyway.

by patio11 13y ago

wtvanhest 13y ago

It may depend on why the exchange went insolvent. If it is not a technical problem, and is rather a Ponzi Scheme, the tax implications may be much different since there are IRS rules that handle Ponzi Schemes. Additionally, those that gained profits in the exchange may be required to pay back those profits to victims through clawback lawsuits+. This IRS link below is a brief overview of how victims of Ponzi Schemes are treated. The most important piece of information is that there is a real chance of a clawback for the people who withdrew and currently think they made money. http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-Schemes http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-... I don't have time to read these documents this morning, but I do know that the people who received returns from Madoff are now the focus of lawsuits. Here is a Forbes article on the subject, there are plenty more you can read out there as well: http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/ http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-s... Here is one example of a hospital having to pay a Clawback. http://www.jewishpress.com/news/breaking-news/hadassah-doctors-strike-over-hospital-deficit-fallout/2014/02/05/ http://www.jewishpress.com/news/breaking-news/hadassah-docto... +My guess is that the clawback lawsuits would yield very little real money since much of the value of Bitcoined gained was due to price appreciation which may keep lawsuits against those who gained fairly minimal since there isn't much money for lawyers to sue for in complex litigation.

zAy0LfpBZLC8mAC 13y ago
Noone was promising any returns, so how could this possibly be a ponzi scheme?
- deleted 13y ago
  [deleted]
- gamblor956 13y ago
  A Ponzi Scheme is legally defined as a fraudulent investment operation that pays earlier investors returns out of the investments of subsequent investors. A promise of returns is not necessary.
  - zAy0LfpBZLC8mAC 13y ago
    Well, and how is "give us your money and you'll later get it back, just minus some fees" possibly an investment operation, be it fraudulent or not? I mean, where did MtGox ever suggest they would pay any returns, let alone where did they ever pay returns?
    - wtvanhest 13y ago
      You bring up an interesting point. I reviewed a wiki list of Ponzi schemes and assuming that is an exhaustive list I have to agree with you that the generally accepted definition is that you must say you are doing something with the money to benefit the investors for it to be a 'Ponzi Scheme'. http://en.wikipedia.org/wiki/List_of_Ponzi_schemes http://en.wikipedia.org/wiki/List_of_Ponzi_schemes The fact that it doesn't fit the wiki or generally accepted definition of a Ponzi Scheme does not rule out the possibility that it still may be considered one but after spending some more time considering it, it does not look like a true Ponzi Scheme, even if the CEO did directly steal the money and use new money to pay old BTC buyers.
      - zAy0LfpBZLC8mAC 13y ago
        Well, what pretty much rules out that MtGox will be considered a ponzi scheme is that if it were, "ponzi scheme" would essentially be a synonym for "fraud". Suppose MtGox wasn't a bitcoin exchange, but rather sold cars, which had to be ordered and paid for in advance. Now, suppose further that the CEO "stole" cars from the company and then bought new ones using the money from new customers when he needed to deliver a car to one of the earlier customers. That's just plain old fraud, not a ponzi scheme, and it doesn't become a ponzi scheme just because it's money instead of cars - and in particular, you as an earlier customer certainly are not liable for the losses of later customers. edit: I mean, MtGox under the assumption that the loss was not due to a technical problem, if it way due to a technical problem, it's obviously not a ponzi scheme anyway.