Client invested with a like-kind exchange into a tenant in common commerical building. He has received rent and mortgage interest deductions since 2004 from the TIC. The bank has foreclosed on property and the State of Idaho is charging the TIC promoters and property managers will a ponzi scheme. Originally there was a legal TIC and rental property, but in 2008 the promoters started the ponzi scheme. The discussion with the investors is whether Section 165 Ponzi scheme loss applies and if so what amount is the loss. My approach is to show this as a 4797 loss of $200K with a sale of business property with non recourse debt of $200K (client's portion). The sales price is the amount of the debt since the FMV is less than the debt and the client's  basis is $400K. Other investors will use the new Ponzi scheme loss and want to write off all of the basis (example $400K) and ignore the debt. This may be a parital Ponzi (date the scheme started) and a ordinary loss from the sale of the business since the Ponzi scheme started years after the TIC exchange was made. Any thoughts.