Investment fraud happens when people are manipulated or deceived while investing, and they have their property or money stolen by scams or brokers. Since the 1990’s there has been a large increase in the amount of trading in the United States securities and commodities markets. This trend has brought about an increase in fraud by investors, shareholders, executives and all other participants in the market.

Unfortunately, most investors will never receive a full repayment for their losses. Hiring lawyers to go after con artists or delinquent brokers usually does not yield justice, and many times is simply a waste of money. But there is good news. Some losses caused by investment fraud or theft may be tax deductible. This is called theft loss tax deduction or embezzlement loss tax deduction. Theft loss tax deduction can be used when an investor is the victim of misconduct by their broker or when someone is the victim of any scam. Some popular scams today include, but certainly are not limited to telemarketing fraud, email scams, boiler room stock scams, high yield investment offshore bank frauds, offshore tax shelter schemes, foreign currency operations, and insurance investment fraud.

Theft loss tax deduction can also help recover any loss caused by broker negligence, stock scams, identity theft, real estate schemes, criminal appropriation, internet fraud, and embezzlement of funds by a lawyer, financial advisor or bookkeeper.

Investment and other theft losses are covered in the IRS section 165 of the tax code. If you wish to claim a deduction for any losses due to investment fraud you must complete a theft loss report. Theft loss reports should be submitted using Form 4684 and Form 1040 Schedule A.

When filing a theft loss report you must calculate your total amount of loss you wish to claim. For stolen property you must reduce the loss by $100 per loss event. You must also reduce your loss by ten percent of your adjusted gross income. In figuring your total loss, you must not consider future loss in profits due to the theft. Theft losses are usually only deductible in the year in which the theft occurred.

There are many technical requirements you must pass in order to qualify for deduction under section 165. There are many theft tax deduction specialists in which you may consult for more information and help with filing a theft loss report.