IRS Representation for Theft Loss

Under current law, specifically the Tax Cuts and Jobs Act (TCJA), personal casualty and theft losses are generally suspended for tax years 2018 through 2025, unless the loss is attributable to a federally declared disaster. However, a critical distinction exists for losses incurred in a **transaction entered into for profit**, governed by IRC § 165(c)(2). These are considered "investment theft losses" rather than "personal theft losses." Because they are tied to profit-seeking activities, they are not subject to the TCJA suspension or the 10% AGI threshold. If your loss meets the specific criteria of a Ponzi-type scheme, **Revenue Procedure 2009-20** provides a "safe harbor" that simplifies the evidentiary requirements and allows you to deduct a portion of the loss in the year of discovery. I handle these complex filings, including the preparation of Form 4684 and necessary disclosures to mitigate audit risk. Given that your loss occurred in 2025, we would need to document the discovery date and any prospects for recovery. I can assist with the quantification of the deduction and IRS representation should the claim be challenged.