@texasttaxguy - the IRS already gave you a 'gimmie' on the losses: you had a loss within the 401K on money you never paid taxes on in the first place!
They will never ask you to pay income tax on the devalued investment; that is actually much better than if the loss occured in a after-tax account as you could only net losses against gains and then only take an additional $3000 in deductions against ordinary income.
Better to lose money in an 401k than an after tax account, but better to gain money in an after-tax account than a 401(K).... in an after tax account that gain is taxed (for most people) at 15% while the distributions from the 401(k) are taxed as ordinary income, which for many is a tax bracket above 15%.
