No. of Recommendations: 3
1. Can I still write off commissions I pay to E*Trade for buying and selling in my Roth account?

2. Does the one year rule apply to stocks I trade within the Roth? In general I am a LTBHer, but if I bought and sold a stock within a year, do I have to pay taxes on earnings, or can I trade all I want with no worry of paying taxes on any earnings?

3. Can I write off capital losses I incur when selling a loser?


All these questions sound like you are trying to treat the tax treatment of Roth holdings like the tax treatment of taxable accounts.

There are no tax consequences for buying and selling shares in a Roth IRA.

1. People throw around "write off" as it meant something, but I can think of several interpretations of that phrase and only one of those interpretations is pertinent to taxable accounts holding stocks (i.e., commissions increase your "tax basis" when calculating capital gains), and has no meaning whatsoever for IRAs (Traditional or Roth). And, in addition, trading commissions must be paid from inside the IRA. Custodial fees, on the other hand, may be paid from either inside the IRA or from other monies, and, only if paid from other monies, is the custodial fee a "miscellaneous expense" that could be itemized in the section of Schedule A that is subject to 2% AGI exclusion.

2. Again, you are trying to apply taxable account rules to "tax favored" accounts. They do not apply. Since you don't declare any gains or losses while the assets remain entirely in the IRA (Roth or Traditional), there is no such thing as short-term capital gains or long-term capital gains. Two things to watch for are: (1) trading commissions must be paid from assets inside the IRA so excessive trading would reduce your returns by the amount of the commissions, and (2) keep an eye out for possible wash sales rules between taxable accounts (selling a stock at a loss) and an IRA (buying substantially the same stock in an IRA within the 30-day window of selling, either before or after the sales). (Informed opinion is that either the loss can't be recognized or this is to be treated as a prohibited transaction, the tax principles being "related party" transactions and "getting the benefit without giving up the control" of the asset. Until either the tax courts or Congress clarifies the situation, informed opinion is to avoid the situation.) Since activity inside an IRA cannot be used for realizing a tax loss, wash sales rules don't apply to transactions that occur only inside the IRA.

3. No. You cannot do "tax loss harvesting" of individual securities in an IRA. The only way to recognize a loss in a Roth IRA account is to withdraw money from all Roth IRA accounts you have, close all the Roth IRA accounts you have, and the total of all contributions to the Roth plus the balance all conversions to the Roth minus the total of all withdrawals is your net loss. This net loss can then be declared on Schedule A in the section subject to 2% AGI exclusion. So, you must close all your Roth IRA accounts, the total withdrawals must be less than total of the funds placed in the Roth accounts (both by contributions and by conversions), the amount of the loss plus all other "miscellaneous expenses" (investing expenses, unreimbursed employee expenses, tax preparation expenses, etc.) must be more than 2% of your AGI, so only the part that exceeds that 2% AGI gets added to the bottom line of Schedule A, and Schedule A benefits you only to the extent that it exceeds your standard deduction. This isn't worth it for most people.

Additional resources:

"All About IRAs": http://www.fool.com/money/allaboutiras/allaboutiras.htm?REF=PRMPIN

IRS Publication 590: Individual Retirement Arrangements: http://www.irs.gov/pub/irs-pdf/p590.pdf
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