Discussion:Claiming Loss on "Roll-Over" IRA
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Discussion Forum Index --> Tax Questions --> Claiming Loss on "Roll-Over" IRA
| 7 March 2006 | |
| Have a client who is ARGUING that the loss incurred from inception to roll-over is allowed. I've explained that NO,,,,this is not allowed.....am I wrong??? | |
| 7 March 2006 | |
| loss is only recognized on complete distribution. Either to the extent of basis or by not having to reprt the income. See Pub 590. | |
| 8 March 2006 | |
| Yep, only if he cashes it out totally, and ends up with a taxable loss, which can only occur with a Roth or non-deductible IRA... | |
| 8 March 2006 | |
| JR1's point is important. Only a Roth or non-deductible IRA qualifies for deducting a loss and then you can only do it upon complete distribution. If a traditional IRA or 401(k) has a loss you do not recognize the loss EVER because you have already deducted all contributions and so you have no tax basis in the IRA. | |
| 8 March 2006 | |
| Much thanks to you all!! Have I mentioned how much I LOVE this site???!!!! | |
Beancounterimua (talk|edits) said: | 19 April 2007 |
| I have a client who has invested in a 401(k) for many years and since the 9/11 terror attacks says about $69,000 has been lossed. I guess she never really gained things back and now the account has been closed. According to her, the tax preparer who assisted her a few years ago said there was some provision where such losses can be deductible over a three year period. I told her I have never heard of such a rule tied to 9/11. All I have ever known is the stuff discussed earlier in this discussion about only be able to recover when your losses exceed your basis, and then only on Schedule A. Anyone heard of anything like this, or something that might sound like this? Perhaps she misunderstood something she was told. I have no idea what she could possibly be talking about. | |
| 19 April 2007 | |
| Bean, in order to deduct a loss, you first must have basis. With a 401(k), basis comes about by making after-tax contributions to the 401(k).
If, upon liquidating her 401(k) (not rolling it over to an IRA), she received less than her basis, then, yes, she would have a deductible loss - taken in 1 year. If she rolled the 401(k) to an IRA, then her basis in the 401(k) transferred to the IRA - and you use Form 8606 to track the basis. | |
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