We analyze here the US-tax implications for an interesting 2008 theft loss. The loss is from an individual’s brokerage account (in a US taxpayer’s name) managed by Bernard L. Madoff Investment Securities LLC. To simplify our analysis, we make two assumptions. First, assume that there were no profits or losses in any managed account from trading. Second, assume that all losses occurred when funds were transferred from one account to another, in order to fund the part of redemptions that were phantom profit, without knowledge or approval of any client. If significant trading profits or losses did occur, then the conclusions will be far more complex. Further assume that the victim’s taxes were timely filed for all previous years. We will refer to such victim as “Taxpayer”.