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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121096  
Subject: Re: tax loss selling equities in Roth IRA Date: 4/15/2008 1:49 AM
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<the loss is disallowed, not deferred.>


I know this topic has been discussed many times here. But, after all it is now April 15th so what the heck.

For all the millions of IRA accounts in existance, there has yet to be any transaction within them that has been reported to the IRS. There is not now nor has there ever been any mechanism in place to do so.

The only relevant reporting activities are on deposits into or withdrawals out of an IRA. Whether you have big success or immense failure on any individual transaction within an IRA is totally irrelevant.

Even if one wanted to set up the reporting of a transaction within an IRA, it would be impossible to record it on any of the 1040 forms. All transactions entered establish either a gain or a loss. By definition there can be no such thing as a taxable gain or loss within an IRA.

Following the logic of a disallowed wash sale loss, if you later on sell out the IRA position at an even larger loss, there would be nothing to deduct on that sale. Worse still, if you now try to take the previous loss from the taxable account, there is no means of doing so. The triggering event which would make the previous sale a tax loss is not reportable.

Common sense tells us that if a purchase within an IRA could eliminate a loss in a taxable account, the subsequent sale of the same security should be able to reestablish the loss in the taxable account. I know many things about the tax code are deliberately obtuse, without a trace of common sense. This one is right up there with the best (or worst) of them if one travels down this particular tax road.


B
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