On March 17, 2009, the Internal Revenue Service issued Revenue Ruling 2009-9 (Revenue Ruling) and Revenue Procedure 2009-20 (Revenue Procedure) which together provide additional guidance for taxpayers who have lost money in the Ponzi scheme orchestrated by Bernard Madoff and other Ponzi-type investment frauds.  The Revenue Ruling generally provides that losses from Ponzi schemes are theft losses, and not capital losses; that such losses are not subject to the $3,000 annual limitation on capital loss deductions or the limitations on personal casualty and theft losses; and that the amount of loss can include “phantom income” received by the investor from the scheme, not just the principal invested by the investor.  The Revenue Procedure provides a uniform approach for determining the proper time and amount of the theft loss.  Generally, the Revenue Procedure deems a loss to be the result of theft if the promoter was charged with fraud or similar crimes; it does not require a conviction.  Also, the Revenue Procedure generally permits taxpayers to deduct in the year of discovery up to 95 percent of their net investment, less certain actual and expected recoveries.  We describe in detail both items of guidance, as well as two related House bills.