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Can the Roth loss on full distribution be used to reduce investment income subject to the 3.8% tax on investment income? Also is there a way to escape AMT?
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Retirement tax questions
The deductible loss from an IRA is a Sch A deduction and has no bearing on the subjects you mentioned.
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Retirement tax questions
"Gains and losses from the disposition of property not included on line 5a that are taken into account in computing taxable income. For example:
Gain or loss from the disposition of an annuity or life insurance contract. See Line 3—Annuities
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Retirement tax questions
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You are correct that when the disposition of a Roth is at a higher value than basis it is "not" added to investment income and therefore the does not impact investment income. When there is a "loss" however it does impact taxable income.
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Your basis is the total amount of contributions in your Roth IRAs.
You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040
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Retirement tax questions
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p590b/ch02.html#en_US_2016_publink1000231083">https://www.irs.gov/p...>
Quote:
Recognizing Losses on Investments
If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis.
Your basis is the total amount of contributions in your Roth IRAs.
You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). Any such losses are added back to taxable income for purposes of calculating the **alternative minimum tax.**
End Quote
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Retirement tax questions
Look at the wording ... you didn't have a "disposition" of an capital asset. You didn't sell anything, you cleared an IRA by taking distributions. What happens inside an IRA is treated differently than the same items in a regular broker's account. If you had sold property or an annuity outside of the IRA then that comes into play on the 8960. Read the line instructions again ...
Line 3—Annuities
Enter the gross income from all annuities except annuities paid from the following:
Section 401 - Qualified pension,
profit-sharing, and stock bonus plans;
Section 403(a) - Qualified annuity plans
purchased by an employer for an
employee;
Section 403(b) - Annuities purchased
by public schools or Section 501(c)(3)
tax-exempt organizations;
Section 408 - Individual Retirement
Accounts (IRAs) or Annuities;
Section 408A - Roth IRAs;
Section 457(b) - Deferred
compensation plans of a state and local
Line 5a—Net Gain or Loss From
Disposition of Property
Calculate and enter the amount of net gain
or loss from the disposition of property by
combining the following amounts from
your properly completed return:
Form 1040, lines 13 and 14;
Form 1041, lines 4 and 7;
Form 1041-QFT, line 3, and the portion
of line 4 attributed to ordinary gain/(loss);
Form 1040NR, the amounts properly
reported on the attachment to your Form
1040NR representing the amounts that
you would enter on Form 1040, lines 13
and 14, if you were filing Form 1040 and
including net gain or loss only for your
period of U.S. residency.
https://www.irs.gov/pub/irs-pdf/i8960.pdf
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