Big Big Win for Madoff Victims! New Schumer “Ponzi Bill of Rights” Legislation Forthcoming - Updated

Senator Schumer Continues Leadership on Tax Benefits for Madoff and other direct and indirect ponzi victims.
Tremendous thanks go to Andrew Lerman, CPA who worked tirelessly with Senator Schumer’s office, Ron Stein of Madoff-Help.Com and the Network for Investor Action & Protection and attorney Helen Davis Chaitman representing her clients and the Madoff Coalition for Investor Protection. Many others, including the Ponzi Victims Coalition of Indirects have played an important part in this outstanding achievement as well. Theft loss deductions for IRAs and pension plans, extended carrybacks, and a waiver of IRA early withdrawal penalties for fraud victims, are just a few of the proposed tax remedies included in the bill. Equally significant is that the bill will now put indirect investors on an equal tax footing with direct investors. This is a giant step forward and a huge accomplishment! Stay tuned for more information and details as to how we can help see them to fruition. Congratulations to EVERYONE! Senator Schumer’s release follows– From: Marsha, Ilene, Andy, Helen, Ron….

FOR IMMEDIATE RELEASE CONTACT: Josh Vlasto
December 7, 2009 202-380-5990

WITH THE ONE YEAR ANNIVERSARY OF THE BERNIE MADOFF BUST THIS WEEK

SCHUMER UNVEILS COMPREHENSIVE MADOFF INVESTORS TAX BILL OF RIGHTS – AIMS TO PROVIDE EXPANDED TAX AND RETIREMENT RELIEF TO SMALL INVESTORS WHO INVESTED ALL AND HAVE NOTHING LEFT BECAUSE OF THE CONVICTED SCAM ARTIST

Thousands of Smaller-Money Victims – Including Many Who Lost Everything, and Didn’t Even Know they Were Investing With Madoff Have Received No Relief So Far

Schumer Proposal Would Allow for Expanded Income Tax Relief, Penalty-Free Deductions from Retirement Savings, and Accelerated Tax-Free Contributions to Retirement Accounts to Make Up for Losses

Joined by middle class New York City residents who lost everything they had at the hands of convicted scam artist Bernie Madoff, U.S. Senator Charles E. Schumer today unveiled his new Madoff Investor Tax Bill of Rights that would dramatically expand federal tax benefits aimed at helping devastated investors recoup some of their losses. Many of Madoff’s victims were older and retired and don’t have a monthly income to rely on day to day. The largest Ponzi scheme, run by disgraced financier Bernie Madoff, cost thousands of investors more than $60 billion. Schumer’s new legislation would expand theft-loss benefits already available to investors who lose money due to scams, allow for accelerated and increased contributions to tax-free retirement accounts to make up for losses, and allow for penalty-free early withdrawals from retirement accounts for investors in dire need of cash to get by.

“The fact that Bernie Madoff swindled so many investors is outrageous, but the fact that so many of the smaller investors, who may not have even known they were investing with Madoff, are not receiving the same assistance as direct investors from is simply unfair,” Schumer said. “This proposal would finally give those smaller investors, many of whom lost everything, the tax relief they need and deserve.”

Schumer said that while many famous names lost hundreds of millions and even billions in the Madoff ponzi scheme, thousands of smaller investors were also left with nothing. These indirect investors typically invested through feeder funds or other brokers and tended to have lower net worth. Typically, these investors gave money to an investment advisor and many didn’t even know that their money was with Madoff.

The IRS originally issued rules this past April under which a direct investor could take a theft loss deduction for their Madoff losses, by saying that theft losses could be treated as net operating losses (NOLs), as if the individual investors were small businesses. Direct investors were allowed to “carry back” their losses for 5 years instead of 3, and carry forward any remaining losses for up to 20 years. A longer carryback is important because it puts cash in your pocket by providing refunds for taxes paid in past year.

But investors in a “small business” with more than $15 million in assets could not qualify for this relief. As a result, the IRS guidance was of help only to the direct investors, because the “feeder funds” that had the money of thousands of smaller investors were worth more than $15 million. By statute, the small business test is done at the level of the business, not the level of the individual partners. Under the law, the smaller, indirect investors are also not eligible for the $500,000 of relief from the Securities Investor Protection Corporation (SIPC), so they were shut out of both government insurance and the expanded carryback on the theft losses.

In the Senate’s unemployment bill, Schumer’s provision ensured that relief under the tax code would not be limited only to corporations and would include these smaller indirect investors; prevents having a “haircut” apply to all losses in all years and ensures that at a very minimum, the indirect investors would be eligible for a 4-year carryback at 100 percent and a fifth year at 50 percent, so they would get what amounts to an additional year and a half of loss carryback compared to current law.

In order to expand relief available to Madoff’s smaller investors, Schumer today announced he is introducing new legislation that would increase the amount an victimized investor can carryback on their income taxes, raise the limit on tax-free contributions to retirement accounts so an investor can replenish losses quicker, and waive penalties for withdrawing from retirement accounts to increase daily cash flow. Many of Madoff’s victims were older and retired and don’t have a monthly income to rely on day to day.

Specifically, Schumer’s Madoff Investor Tax Bill of Rights includes the following provisions:

Expanded Income Tax Relief for Smaller, Indirect Investors — The bill will fix the NOL carryback issue for indirect investors in the 5th year, and allow both direct and indirect investors with losses from a qualified fraudulent investment scheme to carry back their losses for up to 6 years (7 years, in the case of someone who turned 65 by 12/31/08), essentially doubling the period that existed prior to April 2009. Both direct and indirect investors will receive identical treatment.

Allow Victims to Carryback Losses a Retirement Account – Under current law, no tax relief is available for theft losses from a retirement account that invested in a Ponzi scheme, directly or indirectly. Many victims, particularly a number of the smaller investors, had assets in a retirement vehicle, such as an IRA or a 401(k), and now these retirement savings are totally gone.

Waiver for Early Withdrawls from Retirement Accounts — The bill will allow a waiver of the 10 percent tax penalty for hardship withdrawals from retirement plans for people below age 59½ who need the money to survive. People would still have to pay the taxes; the bill will simply waive the 10 percent penalty on early withdrawals in these circumstances.

Benefits for Widows — The bill will fix a problem related to widowers and the carryback of losses. Under current law, a surviving spouse may not be able to fully utilize the loss carryback if the dead spouse was the breadwinner and all of the assets were in his or her name. Under the Schumer bill, when there has been a change of marital status due to death, the surviving spouse will be able to carry back a theft loss from a fraudulent investment scheme to a prior joint return year (up to 7 years, in the case of someone who turned 65 by 12/31/08) and be able to offset all of the joint income, rather than just the income of the surviving spouse.

Increased Contributions to Retirement Accounts — For people whose retirement losses as a result of Madoff’s fraud exceeded 50 percent of their savings in qualified retirement accounts, the Schumer bill will include a special “catch-up” contribution rule allowing them to contribute 50 percent more to such accounts than they are allowed to under current law, for a period of up to 10 years (or until one’s losses have been restored), in order to help restore their retirement assets.

Other Provisions — The bill will also allow a period of time to file amended estate and gift tax returns, because many victims have filed estate or gift tax returns in the past that reported Madoff income which has been found to be fictitious. The effect of the proposal will be to permit estate or gift taxes paid on fictitious amounts, or lifetime gift tax or generation skipping tax exemptions that have been utilized, to be appropriately refunded or restored. The Schumer bill will allow returns filed in the 6 years prior to the discovery of the theft to be amended. In arriving at the total loss eligible for the 6-year carryback (both regular and retirement accounts), the amount of the loss shall be reduced by any expected recovery, via the Securities Investor Protection Corporation, legal action, or other sources.

 Sourced from: Madoff Help News & Assistance