Originally Posted by Hortus
That still doesn't answer my question - can I take a capital gains loss on an investment that I sell during the year to off set distributions from that same investment. I know that I am not required to take the gain when I sell it but this is the opposite case.
So, when withdrawing from traditional IRA , can the capital loss now be used to offset taxable income??i guess IT DEPENDS. in general, There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. 1) say, you ever made nondeductible contributions to your IRA because you were ineligible to make a deductible contribution (i.e., say, income too high, pension plan coverage at work so onetc), then the sum of all these contributions is your basis in your IRA. and that your deductible contributions, if any, are not part of the basis. After the last distribution from your IRA (I mean the one that empties all your IRA accounts and reduces your IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is LESS than your basis, you have a loss that can be deducted on Sch A of 1040 as a Mis. Deduction subject to the 2% AGI threshold.2)as you can see, you can only deposit cash into an IRA and take a distribution in cash from an IRA. Now,say, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, ( I mean the FMV of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA Regular IRA's are pre-tax, you cannot deduct anything from them