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Selling a stock within your Roth at a loss
Old 05-18-2011, 04:25 PM   #1
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Selling a stock within your Roth at a loss

When you have a losing stock in your Roth that has lost value - can you sell it and purchase a different stock within the Roth, and be able to claim that loss on your tax return?

I know in a regular account you can, but wondered if it were different in a Roth Ira. No money will be taken out of Roth.
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Old 05-18-2011, 04:28 PM   #2
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Nope
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Old 05-18-2011, 04:52 PM   #3
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Roth IRAs, just like traditional IRAs, fall in the category of "tax-deferred" accounts. That means that as long as money stays in the account, it's not subject to the normal tax laws.

So any transactions you make inside that account are tax-free. But they are also not subject to other tax laws, such as deducting losses. Just as you can't be taxed on profitable sales if they stay in the account, you can't deduct losing sales.

In short, none of the regular tax laws apply until you start taking money out of the account. Then those withdrawals are taxed as ordinary income.
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Old 05-18-2011, 05:29 PM   #4
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For you tax-Whiz(es)...

I wonder if in the year you set up your Roth (and only that year), could you re-characterize it back to an after-tax account and then deduct a loss ?

Without a lot of investigation, that seems like it could work.
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Old 05-18-2011, 05:29 PM   #5
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It is worth noting that if you sell a stock for a loss in your regular account. You can't buy same stock or mutual fund in your IRA within 30 day before or after the sell or you'll run afoul of the wash sale rules.
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Old 05-18-2011, 05:38 PM   #6
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Quote:
Originally Posted by MasterBlaster View Post
For you tax-Whiz(es)...

I wonder if in the year you set up your Roth (and only that year), could you re-characterize it back to an after-tax account and then deduct a loss ?

Without a lot of investigation, that seems like it could work.
Nope when you re-characterize a Roth conversion it is treated like the event never happened.

What you can do (and I did it once but DO NOT recommend it),is set up multiple ROTH IRA conversion by transferring say 5 different stocks or mutual funds into 5 separate ROTH accounts. Then at the end of the year pick the one or two stocks that have done the best and re characterize and losers
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