We're aiming to talk hedge funds with Felix Salmon of Portfolio on the podcast later today. Here's a bit from him on tax implications of the Bernard Madoff affair. Salmon writes:
Let's say you're a successful businessman who has managed to earn $10 million this year, but who also had $10 million invested with Bernie Madoff. Obviously, you're not happy about seeing your savings wiped out — but if I'm reading this WSJ article correctly, since your loss is a "theft loss", the whole thing is deductible, and you basically get to keep all your income tax-free!
The rest of the item is just as bracing, I'd say. Talking to Salmon should be a world of fun.