An elderly South Carolina woman said she should be allowed to take a deduction on her taxes after losing more than $800,000 and liquidating her retirement accounts in a cryptocurrency scam.

Carol Caputo is petitioning the US Tax Court to reverse the IRS’ decision that she can’t deduct these losses from her taxes. This rejection of Caputo’s deduction has resulted in the IRS hitting her with a more than $320,000 bill for back taxes and penalties, she says.

In the petition Caputo filed June 2, Caputo said scammers told her that her Social Security number had been compromised, money had …