Minn. budget may be victim of Madoff fraud

Bernard L Madoff walks down Lexington Av
Bernard L. Madoff walks down Lexington Ave. to his apartment in New York City. Wall Street baron Bernard Madoff was set tough new bail terms Wednesday including a curfew and wearing an electronic tag, as the U.S. finance watchdog stepped up a probe into his alleged $50 billion dollar fraud. Madoff avoided what would have been his first court appearance since his arrest last Thursday by agreeing to stringent new restrictions under his $10 million bail.

Minnesota's state economist is predicting losses in state income tax revenue stemming from the alleged fraud scheme of investor Bernard Madoff.

Madoff, head of New York-based Madoff Investment Securities was arrested last week on federal charges he orchestrated an elaborate Ponzi scheme, defrauding investors of up to $50 billion.

State Economist Tom Stinson said it is too soon to know how many Minnesota Investors may have been involved. He declined to say how much the scandal might hurt state revenues.

But he said investors defrauded in the scandal will likely file smaller tax returns.

"I just don't know that we will ever know. What I suspect we will see, is hints of what happened because of a drop off in the amount of income at the top taxable rate," Stinson said.

Stinson said losses from theft are deductible. And he said taxpayers who reported capital gains from Madoff investments could amend their tax returns to reflect no gain, prompting a refund.