Wall Street Journal:  Madoff Victims Start Getting IRS Refunds, by Arden Dale:

The IRS has begun to send refund checks to Madoff investors who paid taxes on money they thought they had made before the massive fraud was revealed.

An early trickle of refunds includes checks for substantial amounts, nearly half a million dollars in some cases. The very biggest sums haven’t materialized, however, according to certified public accountants. By some estimates, these could be for tens of millions of dollars. …

The Madoff-related tax refunds are arriving after a lot of uncertainty over how the IRS would handle returns filed by burned investors. Tax advisers clashed over how best to retrieve money for clients as the scandal emerged. Some urged people to file amended returns, while others counseled them to hold off. In March the IRS set the stage for large refunds with a generous reading of rules that let investors take a theft loss on their 2008 tax returns