Loss after investment fraud with Ponzi scheme

The loss from a commercial investment project is deductible as a business expense. This also applies if the loss results from an investment fraud involving a Ponzi scheme that was not recognized by the investor.

If an investor participates in an investment project that is supposed to lead to commercial income but later turns out to be a fraudulent Ponzi scheme, he can claim the loss of his capital for tax purposes. Unlike pure capital investors, traders are allowed to deduct losses as anticipated operating expenses even if ultimately no income is ever generated. For this reason, the Federal Fiscal Court allowed the deduction of losses in a dispute over the purchase of a combined heat and power plant that did not actually exist. Whether a commercial loss exists is not to be determined objectively and retrospectively according to the actual circumstances, but according to the view of the taxpayer at the time of the conclusion of the relevant contracts.