Inherited IRA
I have not had this scenario come up in quite sometime.
I can’t recall the available options or how the beneficiary is taxed.
All help is appreciated
Non-spouse inherited a T-IRA a few years ago. Has since been trading stocks. Beneficiary is now underwater.
Can the beneficiary deduct the losses?
Would he/she be subject to income taxes on the stocks (current) fair market value?
Permalink Submitted by Alan - IRA critic on Wed, 2021-06-16 16:16
No deduction has been allowed since 2018. Before that, a misc deduction was allowed only after all IRAs are closed and the taxpayer received less than their basis in the account. Since TIRAs usually have little or no basis, most misc deductions were from closing Roth IRAs. The former deduction was also not allowed for amounts less than 2% of AGI, and taxpayer had to itemize. So it does not sound like this case would have even met the pre 2018 deduction criteria. There are no cap gains or losses within an IRA and never have been. This taxpayer will only be taxed when RMDs and other distributions are taken from the inherited IRA, and at the ordinary income rate. The losses simply result in a lower value left in the inherited IRA to be taxed when distributions are taken.