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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121261  
Subject: Re: tax loss selling equities in Roth IRA Date: 4/14/2008 1:31 PM
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Does current tax law allow me to deduct losses from equities sold that resided in my Roth IRA?</I

Generally, no. What happens in a Roth stays in a Roth ;). That means, its not taxable or reportable, or at all effects your tax return - that goes for both gains and losses.


Can I offset gains from stock sold in my taxable brokerage account with losses from stocks sold in my Roth?

Generally, no for the same reason as above.


Finally, does the wash rule apply the same between accounts? For example, can I sell "stock A" in my taxable account, wait >30 days, then purchase "stock A" in my Roth IRA account, and claim the loss to lower my cap gains tax burden for 2008?

If you wait > 30 days, then its not a wash sale, so you're just fine. You can sell it, claim the loss, and then buy it back in your Roth > 30 days later.

If, however, if you sold it in your taxable account and then bought it under 30 days in your IRA, then its a big question. Is it still a wash? The answer? No one knows for sure, but you're best off avoiding finding out.

Here's a large discussion of the topic if you're really interested in reading up:
http://www.fairmark.com/capgain/wash/wsira.htm


Or, similarly, sell "stock B" in my Roth, wait >30 days, then buy it in my brokerage account and claim the loss?

Generally no again, for the same reason at the first 2.


Okay, so here's the reason I said 'generally'. The only exception is that if your Roth *as a whole* has a loss. Then, you can close out your Roth entirely and claim the total loss, subject to the Misc Deduction 2% AGI haircut.

This means that if you contributed $8000 to your Roth IRA, and now its only worth $3K, you can close the Roth and take a $5000 miscellaneous deduction. If you make $50K, 2% of that is $1000, so you can deduct $4000... assuming you itemize, etc, etc.

Usually this is a bad idea - because you're out some tax free funds for ever on - and because there's the 2% barrier and the standard deduction to overcome before it helps you any - but that's the complete answer.
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