- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
From your description I am assuming all of this fraud existed on IRA funds. As such the loss is a reduction of the IRA value. Put money into an IRA, you get a deduction (at least partially) and the client needs to determine their non deductible IRA basis. When there is an IRA distribution, all (or some) of that distribution is taxable. I don't hear that there was a a distribution. Essentially the client bought some bogus scheme (in their IRA) and the value of their IRA declined $65,000 due to that bad investment. That just becomes part of the long story.
For what year is IRS looking for tax? In 2017, did the $130,000 REALLY get rolled into an IRA? If NOT, then $130,000 less basis is taxable. If it was rolled over, then no tax until the distribution. The story, as you have written it is incomplete.
Answers are easy. Questions are hard!