does net unrealized DEPRECIATION apply?
To Ed Slott’s IRA guru’s,
I have a friend with a signficant amount of Fannie Mae stock is her 401(k). The cost basis on this stock is MUCH higher than the value of the shares at this time. Is there a way she can take a distribution on these shares, (not a rollover) and claim a tax loss on the shares when she sells later, without having to pay taxes on some or all of the cost basis of the shares upon the distribution?
Thanks gang,
Greg
Permalink Submitted by mk foss on Tue, 2009-09-22 16:34
It doesn’t work when the stock has gone down in value. It seems odd that someone would want to pay ordinary income tax (and perhaps a 10% penalty) to acquire shares to sell later for a capital loss – which offsets low taxed income and is limited in the amount that you can claim each year.
If the individual takes a distribution that includes employer stock, the shares are valued at the fair market value when distributed. The holding period starts when the shares are issued, so if the stock continues to go down – they would generate a short term loss for the first year.