Question
I had an excess 401k deferral in 2018 for which I got an ROE in 2018. The refunded contribution is Roth and thus not taxable. But can I deduct a loss on that money?
Using example numbers for illustration. Let's say I had $1000 in excess Roth 401k deferral in 2018 and did an ROE for the $1000 in 2018. But I had a $200 loss while that money was invested so my plan administrator only returned $800. I received a 2018 1099-R showing the distribution of $800 and Taxable amount (box 2a) of $0 since it was Roth and I already paid taxes on the contribution.
Is the $200 loss deductible? Seems like it should be given that I paid tax on it and then had an investment loss. If yes, how to handle in TT? (Note: seems like answer would be different for traditional 401k since in that case you would only pay income tax on the $800 returned versus the full $1000 you originally earned. The $200 loss is "baked in" already).
Is the $200 loss deductible? Seems like it should be given that I paid tax on it and then had an investment loss. If yes, how to handle in TT? (Note: seems like answer would be different for traditional 401k since in that case you would only pay income tax on the $800 returned versus the full $1000 you originally earned. The $200 loss is "baked in" already).
