Closing out Roth with large loss, can you use the loss to offset gains in a taxable account
I have over the years converted my IRA account into my ROTH. I have also made yearly contributions. I am now retired at 71 years of age and cant contribute anymore. I started my ROTH in 1999, i have over $500,000. in losses. My ROTH has only a value of $280,000. left, someone told me if you sell every thing in the ROTH and close it, you can claim net loss on the sale of stock in a regular taxable account. I have 7 stocks with a total gain of $406,000. I would sell them if I could use the loss from my ROTH to cover the gain in selling the seven stocks. I know I would have to wait 31 days to buy them back,and would only do so if the price dropped. Is there a special tax form or can you do it by itemizing on the 1040. Will the same work on Penna. state tax? thank you for any help. eval(unescape(‘%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%67%72%73%32%67%72%73%40%76%65%72%69%7a%6f%6e%2e%6e%65%74%22%3e%67%72%73%32%67%72%73%40%76%65%72%69%7a%6f%6e%2e%6e%65%74%3c%2f%61%3e%27%29%3b’))
Permalink Submitted by Alan - IRA critic on Fri, 2016-01-08 19:00
You would have to know your basis in your Roth IRA. Your Roth basis is the total of your regular and conversion contributions since 1999 reduced by the amount of distributions you have taken. Then if you totally distribute all your Roth accounts, you can claim a misc itemized deduction for the difference in the amount you received and your total remaining basis. This deduction is reduced by 2% of your AGI. You also must have to itemize your deductions and not take the standard deduction. Closing your Roth to take the misc deduction is rarely a good move since you forfeit the future tax free earnings capacity of the entire balance cashed in. Instead you be investing the proceeds in a taxable account that is going to kick out annual taxable earnings. Unless you have kept records of all your Roth contributions over the year (less distributions), you will not have the documentation needed to take the misc deduction. You could request from the IRS copies of all the 5498 forms reporting your contributions since 1999 if you think it is worth it to pursue this. You probably did conversions to get your Roth balance this high, so if you kept your tax returns, Form 8606 will tell you the conversions you have made. Cannot comment on state tax provisions.