The Madoff Tax Break : Planet Money The IRS has a way to soften the blow.
NPR logo The Madoff Tax Break

The Madoff Tax Break

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.