Are you a victim of investment fraud? Fresh Start Tax can help you recover with a Theft Loss Tax Deduction.

What is a Theft Loss Tax Deduction?

Victims of investment fraud have a tax recovery option under IRC Section 165(c)(2) which is an often overlooked provision from the IRS.

In most instances, capital loss deductions for amounts that exceed capital gains are limited to $3,000 per year.

The filing of a theft loss tax deduction can accelerate the recognition of your investment fraud losses and deduct the entire loss in the year of discovery.

Essentially, the unused portion of loss deduction is applied against income earned for the prior three years which can result in a refund of taxes paid in those years. If any unused loss deduction still exists, it can be carried forward twenty years as a deduction against future income.

The Tax Recovery Process

The recovery of taxes paid to the IRS over the prior three years, through a theft loss deduction under IRC Section 165(c)(2) requires the coordinated effort of experienced tax and legal professionals. Fresh Start Tax professionals will analyze the following factors to determine the feasibility of a theft loss tax deduction under IRC Section 165(c)(2):

  • Was the act perpetrated considered theft?
  • Did act meet legal definition of theft in state of occurrence?
  • Was the investor a victim of fraud targeted?
  • Was the investment a non-business transaction for profit?
  • Is there a reasonable prospect of recovery?
  • Cost basis of property lost due to fraud;
  • Amount of taxes paid for three years prior to theft loss;


Upon acceptance of your tax matter, Fresh Start Tax will amend your tax returns for the prior three years and accelerate the recognition of your theft loss tax deduction under IRC Section 165(c)(2).

Current Investigations

Fresh Start Tax investigates on behalf of victims of investment fraud, the feasibility of filing a theft loss tax deduction under IRC Section 165.  Recent fraud cases which might qualify for theft loss deductions include:

  • Scott Rothstein
  • Stanford Financial Group
  • Bernard I. Madoff Investment Services


Arrow Questions on 165 Theft Loss Deduction – Feel free to email us a question!

Arrow If IRS filed a substitute tax return for you, we can help!

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Mr. Michael D. Sullivan

Michael D. Sullivan is the founder of MD Sullivan Tax Group. He had a distinguished career with the Internal Revenue Service for 10 years. As a veteran IRS Revenue Officer / Agent, he served as an Offer in Compromise Tax Specialist and Large Dollar Case Specialist.

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