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Saffron1 writes:

<<If the balance in an IRA account falls below the amount of the contributions, is the amount by which it falls below the total amount of contributions considered a distribution and, if so, is it taxable? Suppose the contributions were made with pretax dollars which means of course that taxes haven't been paid on the contributions. In the event the accounts drops below the amount of the contributions, how is the difference treated tax-wise as that part of the contribution has "disappeared". >>

While the money remains in the IRA neither gains nor losses have an impact. On withdrawal of all the money in traditional IRAs, though, there could be a loss in that the money taken is less than all pre-tax contributions. In that event, the loss may be claimed as a miscellaneous itemized deduction subject to the 2% of AGI limitation. Details may be found in IRS Publication 590 (Individual Retirement Arrangements) available at

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