Victims of New York financier-swindler Bernard L. Madoff will get tax relief from Uncle Sam, but not as much as some had hoped.
The Internal Revenue Service issued guidelines yesterday that will help many of the 4,800 victims of Madoff's $65 billion investment fraud recoup some losses by seeking repayment of up to five years of past taxes.
"Beyond the toll in human suffering - as entire life savings and retirements appear to have been wiped out - the Madoff case raises numerous tax and pension implications for the victims," IRS Commissioner Doug Shulman told the Senate Finance Committee.
Under the guidelines, money that disappeared in Madoff's Ponzi scheme will be classified as a theft loss, potentially providing victims with a much bigger tax deduction than if it were classified as an investment, or capital, loss.
Madoff pleaded guilty Thursday in federal court in New York to 11 securities-related fraud counts. As investors in the courtroom applauded, Madoff was led off to jail to await sentencing June 16.
The government broadened its claims on assets held by Madoff and his wife, Ruth. In court papers filed in New York late yesterday, the government laid claim to $31.5 million in loans from the Madoffs to their sons, a series of limited partnerships, $2.6 million in jewelry and about 35 sets of watches and cuff links.
The government also filed a motion arguing that Madoff should remain in jail while awaiting sentencing.