Mattress Money: How Civil Forfeiture Leaves Taxpayers with Few Options

Civil forfeiture is a legal practice that allows law enforcement agencies to seize property without a criminal conviction, or even charges. This article examines the tax consequences of civil asset forfeiture, particularly the near-impossibility of individuals or businesses to claim a deduction for forfeited property. By analyzing the treatment of seized and forfeited property by the Internal Revenue Code and related I.R.S. regulations and publications, this study exposes critical gaps in the current system that prevent taxpayers from recognizing losses from civil forfeiture. The article further explores the interaction of tax law and civil forfeiture proceedings, demonstrating how innocent property owners can both be relieved of their property and denied meaningful tax relief. By proposing an amendment to the Internal Revenue Code, this article offers a targeted solution. Ultimately, this study argues for legislative reform that would provide taxpayers a mechanism to account for losses from civil asset forfeiture or regulate the practice further.