Prospects are brightening for a tax-law change to allow victims who invested indirectly in Ponzi schemes through advisers or feeder funds to get bigger tax refunds for their theft losses.
The change would allow victims of swindlers such as Bernard Madoff to carry back their theft losses for as long as five years instead of the current three years. The change is being pushed by Sen. Charles Schumer (D., N.Y.), among others.
Mr. Schumer’s office said Sen. Max Baucus, the Finance Committee chairman, had signed off on the language, and that Mr. Schumer is planning to add it to the unemployment-insurance legislation that is expected to pass the Senate this week.
The change seeks to address a gap in efforts to extend relief to Ponzi-scheme victims. The Internal Revenue Service announced unprecedented tax relief for victims in March, but experts said that in many cases it was doubtful indirect victims would be able to benefit.
“This proposal, once approved, will finally bring smaller investors, many of whom lost everything, on par with direct investors in terms of receiving relief,” Sen. Schumer said in a statement.
