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Financial Planning / Tax Strategies


Subject:  Re: Loss on Roth Conversion Date:  5/30/2019  3:11 PM
Author:  aj485 Number:  129351 of 131270

It's never possible to leave exactly what you lost in the account. If you have a $1,000 loss and want to leave a $1 in the account, your cost basis is $1,001. If you leave $1,000 in the account with a $1,000 loss you have a $2,000 cost basis. Your cost basis is always by definition what you have in the account plus your accumulated losses … so I'm not sure what good trying to leave some larger amount in the account really does for you.

When I said 'something closer to the amount of the loss you are trying to preserve' I was trying to suggest an amount that might show a 50% or 75% loss from the basis that was left, rather than a 999% loss. My concern would be that the IRS may view having a $1001 basis on just $1 left in the account as trying to go around the rules. If you had a $2000 basis with $1000 or a $1500 basis with $500 left in the account, it would be less likely to draw scrutiny from the IRS, IMO.

Yes, technically, leaving $1 in the account with a $1001 basis is within the rules. But you might end up having to spend money on lawyers and accountants to be a test case with that, too.

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