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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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can i deduct a net loss on a rollover ira that consists entirely

Resolved Question:

can i deduct a net loss on a 'rollover ira' that consists entirely of the accumulation of 401K plans from my prior employers. all my contributions and company matches to the 401K plans were on a pre-tax basis. i understand that I need to close out all accounts of the same type
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.
Since the contribution to the plan are on pre-tax basis you tax basis in these IRA and 401K plan is zero. Hence any amount you take as a distribution is taxable as ordinary income and there is no deduction for loss.

Loss is normally when money you receive is less than your investment(cost/tax basis). In case of 401K account your cost basis(tax basis) is zero so there is no loss.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

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