@ElaJ25 wrote:
Thanks so much for that explanation. It doesn't seem quite fair that I can claim that I had a capital losses and gambling losses but not claim a loss for something as highly regulated by the IRS and U.S. Labor Dept and perhaps a few other government agencies especially when it comes to rollovers.
The issue is that you don't have basis in a traditional IRA. Basis is (more or less) the amount of after-tax money you have invested in something. If you buy stocks for $100, and sell for $200, you don't pay tax on the $200 proceeds, only the $100 gain, because the $100 you used to buy the stocks (your basis) was already taxed at some point in your life. If you sell the stocks for $50, you have a loss because you sold for less than your basis.
Because money in a pre-tax 401k or traditional IRA was contributed before taxes were taken out, you have no basis in the account. That means that anything you withdraw is fully taxable, whether that is more or less than you originally contributed.
