A New Jersey Tax court has ruled that investors in Bernard
\nMadoff\u2019s Ponzi scheme are entitled to refunds on state taxes paid for gains
\nthat never existed. John and Cathy Dalton, a Middletown couple who invested
\nnearly $700,000 with Madoff, filed amended New Jersey returns for 2005, 2006
\nand 2007. They had paid taxes on more than $206,000 in capital gains and almost
\n$37,000 in dividends that proved to be fictitious. They recalculated the taxes
\npayable, and requested a $5,026 refund. On October 1, 2009, the Division of
\nTaxation denied the refund, despite the fact that the capital gains and
\ndividends were non-existent.\u00a0\u00a0Their argument was that since the Daltons had withdrawn a portion of their investment in <\/p>\n
2002 and 2008, they presumably could
\nhave withdrawn the capital gains and dividends as well. The State\u2019s decision,
\nhowever, was overturned by Judge Gail Menyuk. She argued that because the
\n“capital gains” and “dividends” derived fully from other
\nclients’ money rather than from actual transactions, there was no constructive
\nreceipt of income .She also pointed out that it would have been impossible for
\nevery Madoff investor to be paid their capital and income, and the state has no
\nway to tell which ones would have been able to do so. This decision impacts the
\nmany New Jersey taxpayers who invested with Madoff. While the IRS allowed Madoff
\nvictims to claim a theft loss on their federal returns, New Jersey has no
\ntheft-loss deduction. Judge Menyuk’s ruling provides a simple recourse for
\nthose trying to recover NJ taxes paid on their Madoff “income”.<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
NJ Tax Court ordered Refund for Madoff Victims’ Phantom Income<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,13,22,25,23],"tags":[],"class_list":{"0":"post-332","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-small-business-forum","7":"category-litigation-support","8":"category-tax-tips-for-individuals","9":"category-taxes-litigation-support","10":"category-taxes","11":"entry"},"_links":{"self":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=332"}],"version-history":[{"count":0,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/332\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}