No.That does not make sense to me. The difference between your input basis to the Roth and the amount dispersed is considered a loss by the IRS and is recognized as Miscellaneous expense on schedule A and therefore also is used in computing taxable income. As a result, it also becomes a loss from the disposition of property that is taken into account in computing taxable income,
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.
