Kathy Bazoian Phelps
Senior Counsel in Ponzi Scheme Litigation
and Bankruptcy Matters

Kathy is a senior business trial attorney with more than 30 years experience prosecuting and defending claims for high net worth clients involved in Ponzi scheme matters and in bankruptcy proceedings. Kathy’s practice includes recovering assets for clients in complex fraud cases under standard fee and alternative fee arrangements. She also handles SEC and CFTC whistleblower claims. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring detailed knowledge about fraud or Ponzi schemes.

Kathy’s Clients in Ponzi Scheme Cases and Bankruptcy Matters
Equity Receivers
Bankruptcy Trustees
High Net Worth Investors
Whistleblowers
Debtors in Bankruptcy
Secured and Unsecured Creditors

Monday, October 22, 2012

New IRS Guidance for Ponzi Scheme Clawback Defendants

Posted by Kathy Bazoian Phelps

For investors who need help from the IRS on how to treat clawback payments made to trustees, the IRS has published a new webpage:

       www.irs.treas.gov/uac/FAQs-Related-to-Ponzi-Scenarios-for-Clawback-Treatment

So far the IRS has posted answers to two questions:

·         How does a taxpayer treat the repayment of a clawback?

·         What does the taxpayer need to establish as to whether the repayment of a clawback is allowable as a deduction (or a § 1341 credit)?

The IRS’ efforts to assist Ponzi scheme victims is commendable, and the information provided should prove to be helpful. Still, any investor who has experienced the misfortune of having to write a check to the trustee of a Ponzi scheme on a clawback claim is strongly advised to seek professional assistance in properly determining the tax consequences. The last thing a Ponzi scheme victim needs is trouble from the IRS!

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