Here's another installment on tax issues related to the Trans Continental scam. You may be a candidate for a fraud (section 165 deduction) if you meet these criteria:
1. Your loss was in a taxable account. (IRAs don't qualify.)
2. You lost a lot of money. There is no hard and fast rule about how much is a "lot," but the more you lost, the more worthwhile it will be for you to go through this process. If you lost $100,000 or more, this is definitely something you should consider.
3. You have enough taxable income to be able to use the deduction. This is a deduction, not a credit, so if your income is too low to pay taxes, it's not worth anything. The higher your income, the more the deduction is worth. If you are in the 10% tax bracket, each $1,000 deduction is worth just $100, but if you are in the 25% bracket, it's worth $250. If you have an IRA or 401(k), you can use withdrawals to increase your income. However, it's important to wait until you are certain your deduction will pass muster with the IRS (three years after filing your return) before ramping up your income.
4. You are prepared to be audited. Most returns claiming a 165 deduction are audited. Although the audit usually focuses only on the 165 deduction, the IRS may choose to look at other areas of your return.