Losses of IRA accounts
Can an IRA owner take their loss, when there is a loss, as a tax deudction after the IRA has been completely distributed?
Can an IRA owner take their loss, when there is a loss, as a tax deudction after the IRA has been completely distributed?
Permalink Submitted by Alan Spross on Mon, 2009-01-26 19:16
There is a misc itemized deduction subject to the 2% floor when all IRAs of that type are fully distributed. If a taxpayer has TIRA and Roth IRAs, all TIRA, SEP and SIMPLE IRAs accounts must be distributed to take the deduction for TIRA losses and all Roths must be distributed to take the deduction for Roth losses. And of course you must be able to itemize in excess of your standard deduction. Also, this deduction can be lost under the AMT if AMT applies.
You also need to know that the “loss” is only the amount that the cost basis exceeds the total of distributions. The cost basis for Roths is the sum of regular and conversion contributions that remain, and the cost basis for TIRA, SEP and SIMPLEs is only the amount of non deductible contributions shown on Form 8606, which is likely to be only a very small amount of the total account values. Therefore, this deduction rarely applies to other than Roth IRAs.