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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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My husband and I saved and deposited into an ira with post

Customer Question

My husband and I saved and deposited into an ira with post tax monies. After the crash we then transfered our monies out of Ira's and into an annuity''s we took a loss of about $25,000
My husband is 73 and I'm 68 the annuity company is sending us a 1099 for the $1200.00 they are sending my husband. How do we deduct our losses we took.
Thank You for any help you mite have
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.
Welcome. THANK YOU for choosing Just Answer. My name is Angela and my goal is to help make YOUR life, a little...LESS taxing.

It sounds as if you had a Roth IRA. Any losses would be a miscellaneous itemized deduction subject to the 2% of AGI threshold limit. Miscellaneous deductions are taken on the Schedule A. To get the benefit of the deduction, your loss will need to exceed 2% of your adjusted gross income, and you will need to be able to itemize.

Link to Schedule A/instructions:

http://www.irs.gov/pub/irs-pdf/f1040sa.pdf
http://www.irs.gov/pub/irs-pdf/i1040sca.pdf

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
Customer: replied 1 year ago.

First thank you Angela,But my question is can we deduct the total 30,000 we lost at one time on our 2012 return it was not a Roth Ira, it was a reg IRA DTD it say's on the client statement. We put in $60,000 and when we transfered what we had left which was about 30,000 we then bought annuties.I do file long form 1040, I have 1 grand child and her son who live with us. and who we totally support.

Expert:  Tax.appeal.168 replied 1 year ago.
Hello again,

You are welcome. As you mentioned "post tax", I assumed it was an Roth IRA. There are four traditional types of IRAS,;

1) Traditional
2) Roth
3) SEP
4) Simple

So since the IRA was not a Roth IRA, it was a traditional IRA. The SEP is an employee Pension IRA, and the Simple is a retirement plan used by small businesses.

------------------------------------

For traditional IRAs this loss provision works only if you have basis from nondeductible contributions. Basis means there were nondeductible amounts contributed to a traditional IRA. If there's no basis, then there will not be a loss that you can deduct on your tax return. However, you cannot cash out only your nondeductible IRAs. All traditional IRA funds must be liquidated to obtain the loss deduction.

If the $30,000 is the basis amount from nondeductible contributions, and the amount exceeds 2% of your AGI for TY 2012, then yes, you may deduct the $30,000. SEE BELOW:

-------------------------------------

Recognizing Losses on Traditional IRA Investments

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). Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax.

Example.

Bill King has made nondeductible contributions to a traditional IRA totaling $2,000, giving him a basis at the end of 2011 of $2,000. By the end of 2012, 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 2013, 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 2013 of $200 (the $1,500 basis minus the $1,300 distribution of the IRA balance).

REFERENCE SOURCE:

http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=3692&f=10&su=p284.13.342.ip_&tt=13&bt=2&bts=21&zu=http%3A//www.irs.gov/publications/p590/index.html

---------------------------

For a better understanding, you can refer to IRS Pub 590:

http://www.irs.gov/pub/irs-pdf/p590.pdf





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