Capitol Loss on an IRA?

#24 07-31-2004, 06:30 AM

"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> writes:
- quote -

> Harlan Lunsford wrote:
> > David Woods, EA, ChFC, CLU wrote:
> > > "John H. Fisher" <taxservice[at]aol.compliance> wrote:

> > > > > Can you declare capitol loss on a traditional IRA account?

> > > > Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":
> > > > > > > "If you have a loss on your traditional IRA investment, you
> > > > can recognize (include) the loss on your income tax return,
> > > > but only when all the amounts in all your traditional IRA
> > > > accounts have been distributed to you and the total
> > > > distributions are less than your unrecovered basis, if any.
> > > > Your basis is the total amount of the nondeductible
> > > > contributions in your traditional IRAs. You claim the loss
> > > > as a miscellaneous itemized deduction, subject to the
> > > > 2%-of-adjusted-gross-income limit that applies to certain
> > > > miscellaneous itemized deductions on Schedule A, Form 1040.
> > > > > > > Example.
> > > > > > > Bill King has made nondeductible contributions to a
> > > > traditional IRA totaling $2,000, giving him a basis at the
> > > > end of 2002 of $2,000. By the end of 2003, his IRA earns
> > > > $400 in interest income. In that year, Bill receives a
> > > > distribution of $600 ($500 basis + $100 interest), reducing
> > > > the value of his IRA to $1,800 ($2,000 + 400 - 600) at
> > > > year's end. Bill figures the taxable part of the
> > > > distribution and his remaining basis on Form 8606
> > > > (illustrated).
> > > > > > > In 2004, Bill's IRA has a loss of $500. At the end of that
> > > > year, Bill's IRA balance is $1,300 ($1,800 - 500). Bill's
> > > > remaining basis in his IRA is $1,500 ($2,000 - 500). Bill
> > > > receives the $1,300 balance remaining in the IRA. He can
> > > > claim a loss for 2004 of $200 (the $1,500 basis minus the
> > > > $1,300 distribution of the IRA balance)."

> > > While your explanation about the compliance aspect is
> > > correct, it is still not a capital loss. You told her she
> > > had a capital loss.

I AGREE!!!=

Although capital was lost,
I just didn't sort the capital from the loss!!!

"Jack"=

- quote -

> > Okay then, Helen and DAve. It would not therefore go on a
> > schedule d? capital loss, yes; subject to ordinary
> > treatment, yes.

> It's (the $200, in this case), is a schedule A loss, subject
> to the 2% limit. It has nothing to do with schedule D.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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#23 07-29-2004, 09:26 AM

Harlan Lunsford wrote:

- quote -

> Okay then, Helen and DAve. It would not therefore go on a
> schedule d? capital loss, yes; subject to ordinary
> treatment, yes.

The IRS position is that this is an ordinary loss, is an
itemized deduction, and subject to the 2% of AGI limitation
as well as not being deductible for AMT purposes. Now, how
they get there under the law is kind of interesting and,
frankly, generally they get fuzzy when describing it <grin> ,
but it essentially comes down to the theory that you should
get a deduction under Section 72 since if you have a gain,
it's income under that section.

From that point, you then find that if it is a deduction,
it's (in the IRS's view) not one of the deductions that is
allowed in computing adjusted gross income. And it's fairly
clear that the IRC provides for individuals that the
"default" for deductions is miscellaneous itemized
deductions, subject to the 2% limitation and not deductible
for AMT purposes. So you need a provision to "rescue" the
deduction from there.

--
Ed Zollars, CPA
Phoenix, Arizona

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#22 07-29-2004, 09:26 AM

John H. Fisher wrote:
- quote -

> > Can you declare capitol loss on a traditional IRA account?

> Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":
> "If you have a loss on your traditional IRA investment, you
> can recognize (include) the loss on your income tax return,
> but only when all the amounts in all your traditional IRA
> accounts have been distributed to you and the total
> distributions are less than your unrecovered basis, if any.
> Your basis is the total amount of the nondeductible
> contributions in your traditional IRAs. You claim the loss
> as a miscellaneous itemized deduction, subject to the
> 2%-of-adjusted-gross-income limit that applies to certain
> miscellaneous itemized deductions on Schedule A, Form 1040.
> Example. [Snipped]

In that situation, it still isn't a capital (or "capitol")
loss, but an ordinary loss that is an itemized deduction.
Many answers will still say "no" because of that.

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#21 07-29-2004, 08:47 AM

Harlan Lunsford wrote:
- quote -

> David Woods, EA, ChFC, CLU wrote:
> > "John H. Fisher" <taxservice[at]aol.compliance> wrote:

> > > > Can you declare capitol loss on a traditional IRA account?

> > > Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":
> > > > > "If you have a loss on your traditional IRA investment, you
> > > can recognize (include) the loss on your income tax return,
> > > but only when all the amounts in all your traditional IRA
> > > accounts have been distributed to you and the total
> > > distributions are less than your unrecovered basis, if any.
> > > Your basis is the total amount of the nondeductible
> > > contributions in your traditional IRAs. You claim the loss
> > > as a miscellaneous itemized deduction, subject to the
> > > 2%-of-adjusted-gross-income limit that applies to certain
> > > miscellaneous itemized deductions on Schedule A, Form 1040.
> > > > > Example.
> > > > > Bill King has made nondeductible contributions to a
> > > traditional IRA totaling $2,000, giving him a basis at the
> > > end of 2002 of $2,000. By the end of 2003, his IRA earns
> > > $400 in interest income. In that year, Bill receives a
> > > distribution of $600 ($500 basis + $100 interest), reducing
> > > the value of his IRA to $1,800 ($2,000 + 400 - 600) at
> > > year's end. Bill figures the taxable part of the
> > > distribution and his remaining basis on Form 8606
> > > (illustrated).
> > > > > In 2004, Bill's IRA has a loss of $500. At the end of that
> > > year, Bill's IRA balance is $1,300 ($1,800 - 500). Bill's
> > > remaining basis in his IRA is $1,500 ($2,000 - 500). Bill
> > > receives the $1,300 balance remaining in the IRA. He can
> > > claim a loss for 2004 of $200 (the $1,500 basis minus the
> > > $1,300 distribution of the IRA balance)."

> > While your explanation about the compliance aspect is
> > correct, it is still not a capital loss. You told her she
> > had a capital loss.

> Okay then, Helen and DAve. It would not therefore go on a
> schedule d? capital loss, yes; subject to ordinary
> treatment, yes.

It's (the $200, in this case), is a schedule A loss, subject
to the 2% limit. It has nothing to do with schedule D.

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#20 07-29-2004, 08:47 AM

Harlan Lunsford <hlunsford[at]bellsouth.net> writes:

- quote -

> Okay then, Helen and DAve. It would not therefore go on a
> schedule d? capital loss, yes; subject to ordinary
> treatment, yes.

It's a misc itemized deduction and goes on Sched A.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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#19 07-26-2004, 07:23 AM

David Woods, EA, ChFC, CLU wrote:
- quote -

> "John H. Fisher" <taxservice[at]aol.compliance> wrote:

> > > Can you declare capitol loss on a traditional IRA account?

> > Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":
> > > "If you have a loss on your traditional IRA investment, you
> > can recognize (include) the loss on your income tax return,
> > but only when all the amounts in all your traditional IRA
> > accounts have been distributed to you and the total
> > distributions are less than your unrecovered basis, if any.
> > Your basis is the total amount of the nondeductible
> > contributions in your traditional IRAs. You claim the loss
> > as a miscellaneous itemized deduction, subject to the
> > 2%-of-adjusted-gross-income limit that applies to certain
> > miscellaneous itemized deductions on Schedule A, Form 1040.
> > > Example.
> > > Bill King has made nondeductible contributions to a
> > traditional IRA totaling $2,000, giving him a basis at the
> > end of 2002 of $2,000. By the end of 2003, his IRA earns
> > $400 in interest income. In that year, Bill receives a
> > distribution of $600 ($500 basis + $100 interest), reducing
> > the value of his IRA to $1,800 ($2,000 + 400 - 600) at
> > year's end. Bill figures the taxable part of the
> > distribution and his remaining basis on Form 8606
> > (illustrated).
> > > In 2004, Bill's IRA has a loss of $500. At the end of that
> > year, Bill's IRA balance is $1,300 ($1,800 - 500). Bill's
> > remaining basis in his IRA is $1,500 ($2,000 - 500). Bill
> > receives the $1,300 balance remaining in the IRA. He can
> > claim a loss for 2004 of $200 (the $1,500 basis minus the
> > $1,300 distribution of the IRA balance)."

> While your explanation about the compliance aspect is
> correct, it is still not a capital loss. You told her she
> had a capital loss.

Okay then, Helen and DAve. It would not therefore go on a
schedule d? capital loss, yes; subject to ordinary
treatment, yes.

ChEAr$,
Harlan Lunsford, EA n LA

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#18 07-23-2004, 01:41 PM

"John H. Fisher" <taxservice[at]aol.compliance> wrote:

- quote -

> > Can you declare capitol loss on a traditional IRA account?

> Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":
> "If you have a loss on your traditional IRA investment, you
> can recognize (include) the loss on your income tax return,
> but only when all the amounts in all your traditional IRA
> accounts have been distributed to you and the total
> distributions are less than your unrecovered basis, if any.
> Your basis is the total amount of the nondeductible
> contributions in your traditional IRAs. You claim the loss
> as a miscellaneous itemized deduction, subject to the
> 2%-of-adjusted-gross-income limit that applies to certain
> miscellaneous itemized deductions on Schedule A, Form 1040.
> Example.
> Bill King has made nondeductible contributions to a
> traditional IRA totaling $2,000, giving him a basis at the
> end of 2002 of $2,000. By the end of 2003, his IRA earns
> $400 in interest income. In that year, Bill receives a
> distribution of $600 ($500 basis + $100 interest), reducing
> the value of his IRA to $1,800 ($2,000 + 400 - 600) at
> year's end. Bill figures the taxable part of the
> distribution and his remaining basis on Form 8606
> (illustrated).
> In 2004, Bill's IRA has a loss of $500. At the end of that
> year, Bill's IRA balance is $1,300 ($1,800 - 500). Bill's
> remaining basis in his IRA is $1,500 ($2,000 - 500). Bill
> receives the $1,300 balance remaining in the IRA. He can
> claim a loss for 2004 of $200 (the $1,500 basis minus the
> $1,300 distribution of the IRA balance)."

Jack,

While your explanation about the compliance aspect is
correct, it is still not a capital loss. You told her she
had a capital loss.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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#17 07-23-2004, 04:27 AM

- quote -

> > Can you declare capitol loss on a traditional IRA account?

> Rarely BUT yes!!!=

Here we discuss the "Traditional IRA":

Jack, never capital, only ordinary.

Helen, EA in PA
50 miles, 3 days, 1 cause - Multiple Sclerosis Challenge Walk for the Cure
October 1 to October 3, 2004
Donate on-line at www.msandyou.org

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#16 07-21-2004, 06:55 AM

MissLivvy wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

1) You didn't establish that you live in a capitol.
2) IRAs don't have capitAl losses.

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#15 07-21-2004, 06:17 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

An IRA is not a capital asset.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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#14 07-21-2004, 05:58 AM

MissLivvy <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

Not a capital loss, no.

But if the following applies, you might be able to gain a tax
advantage from a loss in your traditional IRA:

1. You must have a tax bais in your IRA, as shown on your latest
Form 8606.

2. You must take a complete distribution of the IRA, so it is now gone.

3. If the total amount of IRA distributions were less than your
tax basis, the difference is claimed as a loss on Form 1040
Schedule A Line 22, where it might or might not provide a tax
a benefit.

--

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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#13 07-21-2004, 05:39 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

It would never be a capital loss, but in certain cases you can
get a loss deduction. Since a traditional IRA is fully deductible
and the inside earnings are not taxed, the owner has no basis.
Therefore, there no loss to deduct, regardless of the amount
withdrawn. If the account becomes worthless, there is still
no basis and no loss.

On the other hand, if nondeductible contributions have been
made to the traditional IRA account, the owner does have
basis. If all amounts have been distributed from the IRA and
the owner still has basis, the loss is deductible. It is deducted
as a miscellaneous itemized deduction subject to the 2% limit.

Brian Bivona

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#12 07-21-2004, 05:20 AM

"MissLivvy"
<XeveryidiwantistakenX[at]yahoo.com> writes:

- quote -

> Can you declare capitol loss on a traditional IRA account?

No. IF you have a previously-taxed basis in the IRA and IF you liquidate all
traditional IRA accounts for less than your basis, you have a Schedule A
deduction. See Publication 590.

Phil Marti
Topeka, KS

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#11 07-21-2004, 05:01 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?
> No.

If you could do that, then you also would be declaring capital gains...

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#10 07-21-2004, 05:00 AM

MissLivvy wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

Never. However, it is possible to have a recognized loss if you
have a traditional IRA that has a cost basis. It would have a
cost basis if you made after-tax annual contributions or you
recently rolled or transferred after-tax contributions from a
qualified retirement plan to the IRA. Then, if you completely
liquidate all of your traditional IRA accounts and the amount you
receive is less than your cost basis, the difference is a
recognizable "ordinary loss."

--

Alan
http://taxtopics.net

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#9 07-21-2004, 04:22 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

Yes, but very difficult to do and suggest you see a
qualified acct. first.

bw

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#8 07-21-2004, 04:03 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

No. You never paid tax on the money. You only pay tax on
the withdrawals, *if* your taxable income is over -0-.

Missy Doyle

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#7 07-21-2004, 04:03 AM

XeveryidiwantistakenX[at]yahoo.com (MissLivvy) posted:

- quote -

> Can you declare capitol loss on a traditional
> IRA account?

No. The essence of the IRA concept is that all income is
sheltered until the time when you begin to take
distributions (starting in the year in which you reach age
59 1/2). But just as income is sheltered, so are losses.

There are no taxable events within an IRA -- only when you
take distributions, and money flows _out_ of the IRA.

Bill

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#6 07-21-2004, 04:03 AM

- quote -

> Can you declare capitol loss on a traditional IRA account?

If the traditional IRA account contains only contributions
that have been deducted from taxable income, then the answer
is there is no loss. The IRA account has no cost basis.

If the account has any non-deductible contributions, the
non-deductible contributions are the cost basis. When the
entire account has been distributed, if the amount received
is less than the non-deductible contributions, then there is
a loss. But it can only be claimed as an itemized
deduction.

Mary Ann Thomas, EA in AZ

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#5 07-21-2004, 04:03 AM

"MissLivvy" <XeveryidiwantistakenX[at]yahoo.com> wrote:

- quote -

> Can you declare capitol loss on a traditional IRA account?

No, IRA accounts have neither capital gains or losses. All
withdrawals are ordinary income. If you have account losses,
then you don't pay income tax on them.

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