Roth conversion income offset by loss carry-forwards?
This question is regarding Roth Conversions for 2010. From what I understand, upon converting a Traditional IRA to a Roth IRA you must recognize this conversion amount as income. The question is– can this income be offset by loss carryforwards from previous years?
Any help and insight would be greatly appreciated!
Permalink Submitted by Joseph Arsenault on Wed, 2009-12-02 21:03
NOL carryforwards may be absorbed by Roth conversions. Not passive loss carryforwards. There are other items like charitable carryfowards or unusally high medical expenses that will go unused that could be absorbed as well. Best to meet personally with your CPA and project how much may be converted to absorb these items without having an additional tax liability. I say this because everyones situation is unique.
-J
Permalink Submitted by Amelia Clifford on Wed, 2009-12-02 21:08
Perhaps I should have been more specific. The question was regarding losses due to an individuals portfolio performance. Not NOLs from a business. Can the Roth Conversion amount be offset by investment performance losses?
Permalink Submitted by Joseph Arsenault on Wed, 2009-12-02 21:18
Generally no..
You have your capital loss limitation of 3k against ordinary income
Capital losses can only offset capital gains with the 3k exception. Assuming you are already using the 3k of capital loss each year against ordinary income that you are allowed through Sec 1211 there would be no benefit to a Roth conversion here..
-J