Taxing issues
It was reported yesterday that Madoff victims would be allowed to report their Ponzi scheme losses as theft losses in their tax returns. What was surprising in this was that they would be able to report their "phantom losses" and receive credit for returns that never existed.
The media has highlighted people who are in the terrible situation of having all of their wealth tied up with Madoff. That sad story told, most of the Madoff investors were people of considerable wealth who did not sock everything away in one place. They are people of who had the capability of doing due diligence on the absurdly high and consistent returns of their investments with Madoff LLC. That Madame Bettencourt, reputedly the richest woman in the world, will get tax credits on returns that never existed seems inappropriate. This is 2009! There are easy computer programs that could give Madoff investors relief based on the S&P 500's return over their years of investment, or ten year treasuries plus two, or some other measure. To give tax relief for lost opportunity cost seems fair. To give relief based on fantasy seems like favoritism for a mostly very wealthy group of investors. Chuck Schumer is happy, having delivered for his constituency.
Put that against the absurd IRS practice of limiting total capital losses for individual investors to $3000. This has not been inflation indexed or looked at in light of equity market involvement for, well, almost forever. If the IRS wanted to provide some tax relief that would jumpstart consumer spending in the middle to upper middle class, raising this loss limit would have been the place to start rather than offering gifts to the wealthy of Palm Beach, Paris, and New York.
There is no defense for this $3000 capital loss limit except, as with the AMT, Congress and the White House can't face the loss of tax revenue from these unfair rules that penalize a key demographic for this nation's economy.
The media has highlighted people who are in the terrible situation of having all of their wealth tied up with Madoff. That sad story told, most of the Madoff investors were people of considerable wealth who did not sock everything away in one place. They are people of who had the capability of doing due diligence on the absurdly high and consistent returns of their investments with Madoff LLC. That Madame Bettencourt, reputedly the richest woman in the world, will get tax credits on returns that never existed seems inappropriate. This is 2009! There are easy computer programs that could give Madoff investors relief based on the S&P 500's return over their years of investment, or ten year treasuries plus two, or some other measure. To give tax relief for lost opportunity cost seems fair. To give relief based on fantasy seems like favoritism for a mostly very wealthy group of investors. Chuck Schumer is happy, having delivered for his constituency.
Put that against the absurd IRS practice of limiting total capital losses for individual investors to $3000. This has not been inflation indexed or looked at in light of equity market involvement for, well, almost forever. If the IRS wanted to provide some tax relief that would jumpstart consumer spending in the middle to upper middle class, raising this loss limit would have been the place to start rather than offering gifts to the wealthy of Palm Beach, Paris, and New York.
There is no defense for this $3000 capital loss limit except, as with the AMT, Congress and the White House can't face the loss of tax revenue from these unfair rules that penalize a key demographic for this nation's economy.
posted by John Borden at 11:58 AM
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