cilla Posted April 13, 2007 Report Share Posted April 13, 2007 I'm in need of some assistance. This is my first time using this board. I have a client who is 67 years old. He took a total distribution of one of his Traditional IRAs. It was a loss of $2187. He does not itemize. My question is, do I have to put this 1099-R distribution on the return- even if it was a loss? This is not the only IRA with taxable distributions this year, he has another one with a different company showing a taxable distribution. Both 1099-R's show "taxable amount not determined." Any guidance would be appreciated. Thanks! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 13, 2007 Report Share Posted April 13, 2007 The problem is that he really does not have a loss to deduct. Because when he put it in, he put it in out of pre-taxed income. So his basis is zero in it, for TAX purposes. Also, even if he had made non-deductible contributions, which would give him some basis in the IRA, the rules are that you can only claim the loss when you take out ALL of your IRA money. Quote Link to comment Share on other sites More sharing options...
cilla Posted April 13, 2007 Author Report Share Posted April 13, 2007 The problem is that he really does not have a loss to deduct. Because when he put it in, he put it in out of pre-taxed income. So his basis is zero in it, for TAX purposes. Also, even if he had made non-deductible contributions, which would give him some basis in the IRA, the rules are that you can only claim the loss when you take out ALL of your IRA money. Thanks, I realize he can't claim a loss on this. I was thinking he contributed the basis after-tax with an IRA he opened himself- that is not the case. Anyway - even if he had contributed the basis for this - it sounds like he would have to take out all other IRA's in order to claim a loss - right? So you take a hit on a loss and pay tax on money withdrawn from a Traditional IRA - even if you opened one with after-tax money, if you have additional pre-tax IRA's that you are not withdrawing at the moment Is this right - or am I talking in circles. I'm sorry!! Quote Link to comment Share on other sites More sharing options...
taxtrio Posted April 14, 2007 Report Share Posted April 14, 2007 Thanks, I realize he can't claim a loss on this. I was thinking he contributed the basis after-tax with an IRA he opened himself- that is not the case. Anyway - even if he had contributed the basis for this - it sounds like he would have to take out all other IRA's in order to claim a loss - right? So you take a hit on a loss and pay tax on money withdrawn from a Traditional IRA - even if you opened one with after-tax money, if you have additional pre-tax IRA's that you are not withdrawing at the moment Is this right - or am I talking in circles. I'm sorry!! Work out your numbers on the 8606 form. If he has a "basis" in his traditional IRA's then this form will work out what is taxable, and what is left in his basis; if any. And yes, you have to include balances in ALL traditional IRA's to compute taxable, and nontaxable amounts. No loss can be claimed until ALL monies are w/d from ALL traditional IRA's. Doesn't matter how many traditional IRA's he has, they all are treated as if they are one account. If he has no basis, no non-deductible contributions, then he has no loss-- because he never paid tax on any of the money in these accounts. Clients some times think they have "a loss" because the value of their IRA's go up, and down. Whenever it goes "down" they feel they have a loss, even if they still have more than they started with... just less than they had yesterday. Just like when they own stock, if it goes down and they still own it, they think they have a loss... but no loss really until they dispose of it. Sorry, long day, I'm rambling... hope something here helped you out. Quote Link to comment Share on other sites More sharing options...
cilla Posted April 14, 2007 Author Report Share Posted April 14, 2007 Thanks to both of you for your help! This is how I understood the rules. However, I wasn't sure that I was correct and it's never fun explaining this! I needed confirmation before I tell them. LOL So- we should keep track of all IRA statements every year, by updating the current value and the current contributions on the 8606 form whether you file it or not. Right? Have a GREAT day! Quote Link to comment Share on other sites More sharing options...
joanmcq Posted April 14, 2007 Report Share Posted April 14, 2007 I apologize for triple posting! I can't delete them Thanks to both of you for your help! This is how I understood the rules. However, I wasn't sure that I was correct and it's never fun explaining this! I needed confirmation before I tell them. LOL So- we should keep track of all IRA statements every year, by updating the current value and the current contributions on the 8606 form whether you file it or not. Right? Have a GREAT day! Once you have a basis in an IRA you have to file the 8606. Every year. You can file it without the return, though. Joan Quote Link to comment Share on other sites More sharing options...
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