If it was the business that was targeted
I will get some clarity around that, but I think the answer is “yes.”
As to Nilodop’s comments…the thing that’s quirky about this situation is that it was the taxpayer that caused the funds to be extracted from the account. So, the thief didn’t do it directly. I’m pretty sure, though, that the thief told the taxpayer to pull funds from the “business” account (to ManVsTax’s point). I don’t think it matters what the thief thought, per se. If you think about a “ransom” situation and a thief says, “Give me $10k and I’ll give you access to your computer back,” and you withdraw funds from a business account to pay the thief, I think what would be relevant here is whether or not the computer was used for business purposes. I don’t think paying off a thief with business funds automatically gives you a business theft deduction. There has to be some connection to the business, as you guys are pointing out. Now, if a thief steals directly from a business account, I think that is a clear business theft. And I kind of think that’s how this situation should be treated if the thief targeted the business account, which I think he did. But I’ll get the “client” to clarify.
The situation is pretty intricate and the FBI has been involved. The lady was having some issue with her computer and thought it had been compromised. She calls Microsoft. Microsoft tells her to Google the bank’s 1-800 fraud line, which she did. But, apparently, the fraudsters (overseas) hijacked the bank’s 1-800 number…or at least intercepted some of the calls made to it. So, the woman, who thinks she is talking to the bank, is instead talking to a fraudster. The fraudster tells her (I’m pretty sure) that the business account has been compromised and that she needs move money out of it to prevent loss and into a “new” account that the bank has created for her. Fraudster also tells her to buy a bunch of gift cards and email them to the “bank” so that bank can deposit them into the new account. The lady does all of this, to the tune of $105k.
On top of this, the fraudster convinces her to do the same with respect to a joint account held between the lady (who is in her 60’s) and her elderly mother (who is in her 90’s). So, the lady does this as well, to the tune of $15k or $20k.
And on top of all of this, the fraudster convinces her to buy a bunch of gift cards on her AMEX, which she does, to the tune of $20k or so. Those too got transferred to the fraudster.
And then there’s the IRA…fraudster tells her that her IRA account has been compromised and that she needs to withdraw the funds asap. She does this, to the tune of $110k [$60k + $50k]. But before transferring the funds to the fraudster, she realizes she has been swindled and, ultimately, the thief doesn’t get any of these funds. She was able to re-contribute $60k back to her IRA. When she went to re-contribute the other $50k back into her IRA, the custodian says, “Sorry, but you’ve already done 1 rollover in the 12-month period, so we can’t accept the $50k.”