IRA Rollover

Question: Can I claim any current losses as I rollover a 401K to a Trad IRA in 2009, and into a Roth in 2010?

So let’s say I have a cost basis of $100K in my 401K now worth $60K. In addition I have $10K in cost basis in a non-deductible traditional IRA now worth $6K. I’d like to rollover my 401K to an IRA now, giving me $66K of assets in an IRA. And in 2010, I’d like to move it all into a Roth IRA.

I figure I’d need to pay income tax on $100K (pre-tax 401K earnings) in 2010, but would there be a reduction on this due to the 40K of losses? So pay income taxes on only $60K? In addition, could the $4K of losses in my non-deductible IRA further reduce this taxable amount to $54K?

In general, how would this whole thing work?

Answer: Generally, you can not claim a capital gains loss on your retirement accounts that already are receiving favorable tax treatment. The only time you would have a loss is when you receive a distribution that had previously been taxed.

http://www.irs.gov/newsroom/article/0,,id=201872,00.html

http://www.irs.gov/pub/irs-pdf/p575.pdf

Christine EA Master Tax Advisor

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.

http://www.hrblock.com/tax_professionals/christine_wilkins.html

Roth IRA Conversion 2010

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