IRS frames rules to help Ponzi victims

The Internal Revenue Service issued new rules on Tuesday that would allow victims of Ponzi schemes like the one run by Bernard Madoff to recoup some money by claiming theft losses on their tax returns for 2008.

Investors in Madoff's scheme would theoretically have been paying capital gains taxes on the profits they made from his investments. Since those profits turned out to be phony, the IRS said investors should be entitled to what amounts to a refund of those taxes.

As theft losses, investors are entitled to a much larger deduction than the normal "capital loss" deduction, which is typically capped at $3,000 per year.