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I have a sneaky suspicion that there is more to this than just the conversion issue.

Even though you might think of converting a Traditional IRA funded with non-deductible contributions, when you figure out taxes on the amount converted, the part of the conversion that isn't taxable is pro-rated to the total non-deductible contributions to all your Traditional IRAs divided by the total of all Traditional IRA balances; you cannot pick and chose your tax impact by picking just the specific Traditional IRA to convert.

If this Traditional IRA (the one with the "capital losses") is the only Traditional IRA you have, it is possible to realize the losses for tax purposes by withdrawing all your money from that Traditional IRA and closing it and, if the total amount withdrawn is less than all non-deductible contributions to it, the shortfall can be claimed as an "investment expense" on Schedule A in the section subject to 2% AGI exclusion (which for modest losses is likely to be a big hurdle).

I don't know if there is any way to recognize a loss for a conversion. That might be a good question for the "Tax Strategies" board <>.

For others reading along: whether the money is in a Traditional IRA or Roth IRA doesn't make any difference for the growth of investments in that flavor of IRA--the growth depends on how the specific investments perform. Also, there is no recognition of capital gains or capital losses in any flavor of IRA or any "tax favored" account--capital gains and capital losses are meaningful in a taxable account and are recognizable on sale of investments.
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