Timeline for Can capital loss in traditional IRA and Roth IRA be used to offset taxable income?
Current License: CC BY-SA 3.0
17 events
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| Jul 5, 2012 at 1:42 | comment | added | JTP - Apologise to Monica♦ | Indeed. So far, the regulars agree with me. I added an answer to Stussy pointing out both my experience doing exactly this as well as the Schwab form allowing the transaction. Until I see an IRS authored document, I am going with my experience. | |
| Jul 5, 2012 at 0:45 | comment | added | Dilip Sarwate | @JoeTaxpayer With regard to distributions in-kind rather than in cash, did you notice a recent response in misc.taxes.moderated which said "Six types of distributions are specifically allowed to be in-kind. RMDs are not among them."? | |
| Jun 11, 2012 at 17:11 | vote | accept | Tim | ||
| Jun 11, 2012 at 17:11 | vote | accept | Tim | ||
| Jun 11, 2012 at 17:11 | |||||
| Jun 11, 2012 at 11:21 | history | edited | Dilip Sarwate | CC BY-SA 3.0 |
added 217 characters in body
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| Jun 10, 2012 at 13:24 | comment | added | Tim | I now see the two examples are consistent with each other. But the final balance consists of parts from both the deductible and nondeducitble contributions. Isn't the loss supposed to be calculated for nondeductible contribution only? I posted my confusion in a new post money.stackexchange.com/questions/15450/… | |
| Jun 10, 2012 at 11:13 | comment | added | Dilip Sarwate | Both examples are correct. Once again, you seem not to be paying attention to what the examples are trying to explain to you, and failing to understand the examples. | |
| Jun 10, 2012 at 2:51 | comment | added | Tim | Two examples. In example 2 of fool.com/personal-finance/taxes/2004/08/20/…, the loss is calculated as the difference between total distributions and basis. In the example near the end of easyretirementknowhow.com/articlecategories/QualifiedPlans/…, the loss is the distributions minus basis minus deductible (i.e. tax-deferred) contribution. I wonder which example is correct? | |
| Jun 10, 2012 at 2:51 | comment | added | Tim | Thanks! In the part 4 of your reply, you discuss the case for traditional IRA when there are both deductible and non-deductible contributions and the account is being emptied. I wonder how the loss is computed in such case? | |
| Jun 9, 2012 at 23:34 | comment | added | Dilip Sarwate | Tim: In simplest terms On the tax return for the year in which your Roth IRA balance becomes zero, if you have a loss -- total distributions less than total contributions --, you MIGHT be able to deduct it (or some part of it) on Schedule A because of the 2% AGI threshold. Whatever falls below the threshold is lost forever. Also, it is a use it or lose it deal. THERE IS NO UNUSED PART TO BE CARRIED OVER TO FUTURE YEARS, NOT THE PART THAT WENT BELOW THE THRESHOLD NOR ANY PART THAT YOU "SAVE" FOR USE IN FUTURE YEARS. IT IS GONE. Just suck it up and grin to hide your pain. | |
| Jun 9, 2012 at 23:02 | comment | added | Tim | @DilipSarwate: Thanks! I should have asked "If the capital loss has some left after it is deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold, can the left-over be carried to the next years? | |
| Jun 9, 2012 at 21:32 | comment | added | Dilip Sarwate | "Suppose I have a huge capital loss in my Roth IRA, and I basically don't have much other income. If the capital loss has some left after offsetting income, can the left be carried over to the next year.." Tim, what part of the following sentence, which I specifically set in bold font in my answer, do you not understand? any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts? | |
| Jun 9, 2012 at 15:57 | comment | added | Tim | Thanks for the edit! (1) "you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI", do you mean what I you can deduct is equal to "my total miscellaneous deductions" minus "2% of my AGI"? (2) Suppose I have a huge capital loss in my Roth IRA, and I basically don't have much other income. If the capital loss has some left after offsetting income, can the left be carried over to the next years, although my AGI will change in the next years (and therefore the left capital loss this year may not surpass 2% of my AGI in the next years)? | |
| Jun 9, 2012 at 1:56 | history | edited | Dilip Sarwate | CC BY-SA 3.0 |
edited in light of JoeTaxpayer's correction to previous version
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| Jun 8, 2012 at 22:06 | comment | added | Tim | Thanks! In your first part, (1) "If the total amount of money that you withdraw from your Roth IRA is less than the total amount of money you contributed to your Roth IRA ...", is this withdrawal one time thing? How is this withdrawal empty the entire Roth IRA? (2) "... a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI." Does it mean that the amount that I can deduct is the "total Miscellaneous Deductions" minus 2% of the AGI? | |
| Jun 8, 2012 at 16:05 | comment | added | JTP - Apologise to Monica♦ | One correction - withdrawals can be made "in-kind." You are correct that new deposits are cash only, but one can take a withdrawal by simply transferring assets from the IRA to a non-sheltered account. This goes to the issue of those who are so afraid of RMDs. Tax is due on the value of the assets transferred, but the asset does not to be sold. (if you decide to edit your response, I'll kill this comment) | |
| Jun 8, 2012 at 3:09 | history | answered | Dilip Sarwate | CC BY-SA 3.0 |