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I would like to rollover my IRA to a Roth IRA. As I understand this proccess, I will have to sell the stocks in the IRA (2K of NOK @ $27.22) and then open the Roth IRA and pay the Taxes owed.

You don't have to sell the stocks. They can be transfered to a new Roth account, but you'll owe taxes on the fair market value on the date of sale. Whatever you do, don't take custody of the stock of money if you do sell them. Have the custodians do everthing.

I have two questions:
1. Can I offset the taxes owed from the rollover by the losses on the stock?

No. That defeats the purpose of everything. That loss goes away unused.

2. I started the IRA at the beginning of the year and will not have a chance to use this $2k in taxable income reduction until tax time next year, can/should I just roll it into a roth and not get the tax benefit and therefore not have to pay the taxes? or does it not work like that.

It doesn't matter when you contributed it. Did you say it was for 2001? If so then you have the option of recharacterizing it as a Roth. Go to the custodian and tell that you want them to recharacterize it as a Roth and they'll transfer the contribution and earnings or loss to a new Roth acount. You'll treat the contribution and if you never made the contribution to an IRA.
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