IRA funds stolen by advisor
I have a client that invested $103,000 traditional IRA funds with an advisor that stole their funds and other clients funds. The advisor is now in prison for 6 years. They have received a 1099 showing the $103,000 as a distribution and taxable as unknown. This is 100% of their IRA funds, no other accounts. Is it possible to show this as a loss and deduct the full amount. Could it be a miscellaneous itemized deduction? The client only has social security and pension income.
Permalink Submitted by Alan - IRA critic on Thu, 2023-01-26 00:52
Theft losses are no longer deductible since 2018, and there is no other deduction that could apply. The only recourse might be through litigation against the advisor or their employer on behalf of all the plaintiffs. Is there any reason that the IRA custodian was negligent in allowing the advisor to order this distribution, or had client given the advisor full authority over the IRA? As for the 2022 return, the 1099R must be reported, and perhaps an installment agreement requested from the IRS extending the time to pay these taxes.
Permalink Submitted by Harold Morrow on Sat, 2023-02-04 18:06
A deduction is available for stolen funds through Revenue Procedure 2009-20. Fill out Section C of form 4684 and follow the the directions in the instructions to the form.
Permalink Submitted by Alan - IRA critic on Sat, 2023-02-04 18:35
OK, thanks for the heads up.