Trust me - and yes, I have all the right qualifications - and more important - experience to comment. When SPNG "happened" it absolutely could NOT be done. The IRS position has softened - making it sort of possible, but be entirely prepared to defend it enough to at least avoid a penalty for doing so. And I suggest the one claiming he had it successfully done...actually only filed and had his return processed. They have not actually looked at, reviewed or OKd the handling....which they most likely would challenge if they do - and have plenty of time to do so.
Lets be clear the difference your trying for is the tax rate difference between Investment Losses and Capital Asset losses. It isn't really huge. There are many reasos they will deny the theft claim on a security: A big one is a practice that covers more than this - something you bought through a middleman - (the stockbroker) - and delivered - can not be a theft (unless someone actually stole the stock from your portfolio itself). This rue encompasses so much more than this it is something they are not going to want to give up on. And you can probably see good reason for it. (The complexities of their reporting being fraudulent NOT being a theft of the security - also plays against the claim). (You still actually have the agreeably non-existent) stock. It isn't stolen. It lost value. And in that world - they ae allowing you the loss....the same category they would have allowed the gain (and will allow you to offset this loss against. They aren't disallowing you the loss!) Also at this point - if you could make the claim it would be time barred as the applicable period for claiming it is when the theft occurred....it is not open to an option. If you want to try and file a corrected return - out of statute, etc...it will be something between denied because they have no authority to act on it...ot worse...open it and all years up to review and extension of the tolling of the statute of limitations....
Here some copy paste of legal/tax things: Whether investment losses from fraud should be treated as capital losses or theft losses when the stock is purchased through a stockbroker is currently undecided for tax purposes. Many recent court decisions have denied such theft losses citing, in part, a need for direct privity between the victim (taxpayer) and perpetrator of the fraud when a stockbroker is used. However, both Rev. Rul. 2009-9 and Rev. Proc. 2009-20 describe the IRS’s position on theft losses from fraud; and that position may be softening.
Depending on the circumstances, losses on investments due to fraud may be treated as a casualty loss, as a capital loss, or as a return of capital. Normally, worthlessness of investments or the loss on their disposal would be a capital loss. Taxpayers would generally not favor having phantom income from a Ponzi scheme classified as a return of capital because the statute of limitation on refunds may have expired for the early years of the scheme and because the courts are divided on this issue. Where a fraud exists, however, the loss may qualify for theft-loss treatment.
To deduct a theft loss, the taxpayer must have something that can actually be taken (like money) rather than the mere (and perhaps false) promise that an asset exists. A reduction in the resale value of property and other indirect effects of thefts would not normally produce a deductible casualty loss.
