Early in the year, I bought $15,000 of shares in a mutual fund within a
IRA account. At year end, they're worth only $11,000. I know I can't tax harvest the $4,000 loss by just selling the stock and leaving the
proceeds within the tax-deferred IRA.

But what if I sold the shares and took the $11,000 from the IRA as a distribution?

I know that amount would be taxable as ordinary income-- but is there
any way to deduct the $4,000 loss?

--
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According to Wade Garrett <wade@cooler.net>:

Early in the year, I bought $15,000 of shares in a mutual fund within a
IRA account. At year end, they're worth only $11,000. ...

But what if I sold the shares and took the $11,000 from the IRA as a >distribution?

I know that amount would be taxable as ordinary income-- but is there
any way to deduct the $4,000 loss?

Assuming it's a typical IRA with a zero basis, no. The 11K would be
taxable as income.

--
Regards,
John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

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<< The foregoing was not intended or written to be used, >>
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<< are at www.asktax.org. >>
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On Thursday, December 22, 2022 at 10:43:22 PM UTC-5, John Levine wrote:

According to Wade Garrett <wa...@cooler.net>:

Early in the year, I bought $15,000 of shares in a mutual fund within a
IRA account. At year end, they're worth only $11,000. ...

But what if I sold the shares and took the $11,000 from the IRA as a >distribution?

I know that amount would be taxable as ordinary income-- but is there
any way to deduct the $4,000 loss?

Assuming it's a typical IRA with a zero basis, no. The 11K would be
taxable as income.

--
Regards,
John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly
--

Regardless of whether there is basis in the IRA or not, the answer is still (generally) "no". The only circumstance where you can deduct a loss in an IRA is when you close out the account and the total received in the distribution is less than your basis
in the IRA.

Ira Smilovitz, EA
Leonia, NJ

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<< The foregoing was not intended or written to be used, >>
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"Wade Garrett" wrote in message news:to2qca$1g9pq$2@dont-email.me...

Early in the year, I bought $15,000 of shares in a mutual fund within a IRA >account. At year end, they're worth only $11,000. I know I can't tax
harvest the $4,000 loss by just selling the stock and leaving the
proceeds within the tax-deferred IRA.

But what if I sold the shares and took the $11,000 from the IRA as a >distribution?

I know that amount would be taxable as ordinary income-- but is there any
way to deduct the $4,000 loss?

You've already gotten the "benefit" of the $4,000 loss by virtue of the fact that you're only paying tax on $11,000 rather than the $15,000 you
originally excluded from your income. Remember - that $15,000 would have been subject to tax had you not sheltered it in the IRA. By only paying tax
on $11,000, you effectively got the effect of a $4,000 deduction.

--

--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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Early in the year, I bought $15,000 of shares in a mutual fund within a
IRA account. At year end, they're worth only $11,000. ...

But what if I sold the shares and took the $11,000 from the IRA as a >>distribution?

I know that amount would be taxable as ordinary income-- but is there
any way to deduct the $4,000 loss?

Assuming it's a typical IRA with a zero basis, no. The 11K would be
taxable as income.

But you are "deducting" the $4,000 loss because you are only
paying tax on $11,000 instead of $15,000.

Bob Sandler

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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