can someone ever deduct a capital loss against a traditional ira?

Question

are there any provisions in the tax code that would allow me to deduct a capital loss against a traditional ira account? say some one had purchased an american common stock at it's high's and it later became a penny stock or had depreciated 80 or 90 percent.. is that a deductible loss on a tax return. if no,. why not and if yes please give a scenario in which this would be allowed.

the taxpayer and his wife (my aunt)started contributions to their traditional ira's in 1983 and continued through till their retirement in 1999 at age 65. He was a high paid executive who earned greater than $140,000 per year (his wife worked also) they both had retirement plans at their jobs and also funded their traditional ira each year for the maximum allowed amount. the ira assets consisted entirely of his company stock (purchased between $40-$65 per share)which they sold in December 2006 for $3000. and spent. by my calculations they have 17 years of contributions at 4000 per year and it just would seem to be deductible as a capital loss. my aunt is a pack rat and has all the statements for the account as well as 50 plus years of all kinds of paperwork.

**********************************************I can honestly say you were all consistent as usual and you're all mistaken. i would not want any of these "experts" to advise me or anyone else for that matter on any tax matter.
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Answer 1

No, it is not allowed as a deduction. When you contribute to a traditional IRA you get the deduction for what you contributed at the time of the contribution. And you get taxed on your IRA when you get a distribution from it. So on a stock loss, all that happens is that you have less to get in the future, so you would be taxed on less. You can however get a capital loss on a Roth IRA though. If what you got back on the Roth IRA is less than what you have contributed to it, you can deduct that loss, but not a loss on a traditional IRA.

Answer 2

It is not clear from your statement whether these stocks were purchased inside of a traditional IRA; or are they two different questions.

First. Gains or losses inside of a traditional IRA is not reported. You may or may not get Savers Credit depending on your income level and the year of the contribution at the time you put the money into a traditional IRA. You will pay taxes when you withdraw and possibly penalty if before your retirement age.

So if these stocks were purchased inside of a traditional IRA, then there is no deduction.

If the stocks were purchased inside of an investment account and held for more than 1 year, then you can report capital loss. The amount of deduction is subjected to limitations, and any excess amount can be carry to future years.

A short answer to your question "Can someone ever deduct a capital loss against a traditional IRA?" is "Nope".

Best wishes.

Given your additional comments:
Since he has made over $140k per year and had been a 401k participant, some of his IRA contribution were not deductible. The tax treatments for deductible vs non-deductible IRA are different. My suggestion is that they go to a tax accountant with all the paper she kept to sort it out.

Answer 3

You were not taxed on the money that went into the IRA. You have not been taxed on the earnings inside the IRA. Allowing a deduction for loses would give you a 'refund' of taxes never paid.

Answer 4

No, you can't deduct a capital loss on investments within an IRA. That's the price you pay for the amount being allowed to grow tax-deferred.

Answer 5

There are no capital gains or losses associated with an IRA. You are taxed at the ordinary income rates for the amount you withdraw and your income at the time you withdraw from an IRA.

Answer 6

Good place to start is your tax book for tax tax form 1040 line #13 Capital Gain Or (loss)

Answer 7

You can't deduct it now, but it will count against your other earnings when you start to withdraw from the IRA.

Answer 8

TAXES ARE BASED ON A YEARLY ACCOUNT.AND THE ANSWER IS NO.IT SHOULD HAVE BEEN DONE THAT YEAR AND NOT AFTER WARD.