Credit Suisse (Casualty Loss)
Investors at four high-end luxury resorts have filed a class action lawsuit against Credit Suisse and Cushman & Wakefield, contending they conspired to inflate the value of property so that they could take them over.
In the Complaint, the Plaintiff’s lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent a federal law on real estate appraisals. The Plaintiff alleges they inflated the value of resorts and made millions of dollars in fees on loans against the property. Credit Suisse knew the resorts would most likely default under the weight of inflated values which would allow the bank to take ownership of each on the behalf of the Creditor.
For taxpayers who have been defrauded, they may be eligible for a tax loss deduction for their fraud damages if the fraud is considered theft under their state’s law (see Gerstell v. Commissioner 46 TC 161 (1966)). The tax loss deduction may be carried back for prior years for tax refund, or carried forward for future years for tax free income up to the amount of the tax loss.
See article, Credit Suisse is Accused of Defrauding Investors in 4 Resorts
The New York Times, January 5, 2010.
Casualty (Theft) Loss: Predatory Lending
Beverly Hills, CA (PRWEB) December 7, 2009 — In 2009, the proliferation of foreclosures and litigation over bank consumer and commercial loans mandates review of the casualty (theft) loss rules.
In a recent case filed in California, trial attorney, Sanford Passman, filed a cross-complaint against a bank for predatory lending. The claim was based on the bank’s failure to adequately inspect equipment for which they made a secured collateralized loan. Effectively, the bank made a significant loan to a doctor for medical equipment (purchased under an existing lease) without verifying the value of the equipment. Within several years of the loan, the equipment malfunctioned, became non operational and obsolete and was unusable. The lender then sought to foreclose on the doctor’s entire medical practice.
The Plaintiff filed a Motion for Writ of Attachment, at which time Sanford Passman was able to effect a settlement on behalf of his client, which enabled the client to declare a significant casualty (theft) loss for losses regarding the acquisition of the equipment.
For clients who may have used third party funds (i.e., bank funds) to make acquisitions of property (either real property or personal property) and to the extent that the value of the collateral pledged for the loan or loans is less than the outstanding balance of said loans, then the borrower is in a default situation facing litigation, and consideration should be given by the borrower as to whether or not a cross-complaint should be initiated against the lender, based on predatory lending practices, which could allow the borrower significant tax benefits by way of the aforesaid casualty (theft) loss.
Under the case of Gerstell v. Commissioner 46 TC 161 (1966) theft is determined under state law. If the state in which the Taxpayer resides includes fraud as a form of “theft” (i.e., the fraudulent misappropriation of one’s personal property), Taxpayer may be entitled to an ordinary loss deduction for casualty (theft) loss. The tax loss is the difference between the fair market value of the asset (purchased under the loan) and Taxpayer’s obligation for the loan made.
Court of record for case cited: Superior Court of the State of California, County of Los Angeles, Northwest District. Case # LCO86056.
For litigation questions please contact Sanford M. Passman, Esq. at: Sanford M. Passman, Esq., 6303 Wilshire Boulevard, Suite 207, Los Angeles, CA 90048, Tel: (323) 852-1883.
For tax questions please contact Gary S. Wolfe, Esq., at Gary S. Wolfe, A Professional Law Corporation, 9100 Wilshire Blvd., Suite 505 East, Beverly Hills, CA 90212, Tel: (310) 274-3116, Web: http://gswlaw.com
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