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Deductible loss on Roth IRS????

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    Deductible loss on Roth IRS????

    The tax book (4-28) talks about if A Roth Loss is deductible but the explanation is very unclear to me.

    My client lost all $60,000 of his Roth IRA last year. If he did not have anymore Roth IRa's is the total
    Deductible? The traditional IRA deductibility is clear but not the Roth. Any help would be appreciated.


    Only the amounts he contributed are deductible. Any income that accrued before the investment tanked are not deductible.


      The above reply is correct ... he can deduct his basis, i.e. his own contributions, not the earnings, if any, before it became worthless. The loss is deductible in the year all funds in his Roth IRA became worthless or are distributed. If they're close to worthless but aren't quite, he can trigger the deduction by withdrawing all that remains. If his Roth IRA funds are invested with two or more trustees, the loss isn't deductible until they all become worthless and/or are distributed. The one good thing is that a Roth IRA and a traditional IRA are regarded separately for this purpose.

      The loss is deductible on Schedule A, as a Miscellaneous Deduction, and is subject to the 2% haircut. (Personal comment: This seems unfair, because a similar loss on an annuity is also deductible but is NOT subject to the 2% haircut.)
      Roland Slugg
      "I do what I can."