Is the amount in box 2a of the code 8 Form 1099-R zero (which is what I would expect)? If so, the excess is only being included in income once, not twice.
No losses are to be entered as miscellaneous income. If the code 8 Form 1099-R shows the same amount in box 2a as is in box 1, resulting in the box 2a amount being included on Form 1040 line 1, amount of the loss on the money while it was in the traditional IRA needs to be included as Other income not reported on a W-2 as I described above.
