Tentman
Level 3
‎03-09-2026 07:45 PM

Hello All:

I have client who was scammed into purchasing gift cards.  The client has a police report.  I have tried to enter the amount of theft by deception into form 4684.  I have not been able to get the loss amount to flow over to Schedule A.

I have seen some guidelines that say a casualty loss can not be deducted unless it was part of a Federal Declared Disaster.

This is my 1st time with this type of loss.  Any advice will be greatly appreciated.

Thanks

Tentman

 

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Accountant-Man
Level 13
‎03-09-2026 10:01 PM

The law changed.

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Skylane
Level 12
Level 12
‎03-10-2026 07:10 AM

The only permissible theft deduction is a Ponzi scheme. As @Accountant-Man  stated the law changed.

If at first you don’t succeed…..find a workaround
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Terry53029
Level 15
Level 15
‎03-10-2026 08:19 AM

You can still take a loss for an investment scam entered into for a profit.

The Chief Counsel memo affirms that taxpayers who are victims of scams may claim a theft loss deduction under IRC § 165, but only if their situation meets specific conditions:

  • The loss must result from criminal conduct classified as theft under applicable state law;
  • The taxpayer must have no reasonable prospect of recovering the stolen funds; and
  • The loss must arise from a transaction entered into for profit.
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