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Estate Tax Victory for Madoff Fraud Victim

Represented the estate of a deceased victim of the massive fraud perpetrated by Bernard Madoff in an important litigation victory in U.S. Tax Court. When he died in 2008, the decedent owned an interest in an LLC, whose only asset was an account with Madoff, which became worthless a few months after the decedent’s death when the Madoff fraud was uncovered. The decedent’s estate claimed a deduction of $5.17 million on its federal estate tax return tied to a theft loss relating to the value of its interest in the LLC on the date of the decedent’s death. The IRS denied the deduction on the ground that there was no theft or that, if there was, the theft was from the LLC and not the estate, however the U.S. Tax Court ruled that, pursuant to Internal Revenue Code section 2054, the estate was entitled to the deduction.