A tax attorney told me during a free 30 minute consultation that, when I deposit the proceeds of an investment fraud lawsuit back into the traditional IRA as partially recovered losses from a bankrupt bond investment, I should ask the IRA administrator to adjust the basis of the investment accordingly. From what I have been able to determine since this conversation, losses (or gains) in a traditional IRA have no tax consequences. It's my understanding that when I start drawing from my IRA that it is just seen as income and that I can't take a deduction for any losses suffered from a fund that I am drawing from. If that is the case, is there any reason to keep track of the basis of traditional IRA investments?
