Thanks Bowser
Thanks but that wasn't the question. The investors made money "on paper" and payed taxes on that income. Income they didn't withdraw.
It was "phantom" earnings.
They want the taxes refunded in whole. I don't know about deductions for loss of principle.
How the Government Screwed Madoff Victims Again"
Should we amend our tax returns to recover the taxes we paid on phantom income and then take a theft loss deduction separately?