1099 R question

[glhendricks]

We took a distribution in Feb last year to loan my son some money for his new home. The money came from my husbands IRA. The bank broker sold some mutual funds from the IRA account. My son paid us back, but not within 60 days, it was closer to 90 days. We put most of the money back into the same IRA plus our brokerage account. 

My question is... since the mutual funds were not performing very well over the years and were considered a long term investment, must we pay taxes on the full amount of the distribution or can we adjust the amount to come up with a cost basis? I've always used TT to do my taxes, this year I'm freaking out that I may have to include the full $55,000 as taxable income. Please Help!!! 

[JulieS]

No, the gains and losses inside an IRA do not count. The fact that there were losses on the funds does not change the fact that the distribution is taxable. 

If you have non-deductible contributions in the IRA, that would reduce the amount of it that is taxable, but this is not common. 

If you made and tracked non-deductible IRA contributions in the past, you can enter that in TurboTax and it will reduce your total tax. 

This is how your would report that in TurboTax:

1. Select Federal, then Deductions & Credits. 
2. Expand the list and scroll down to Retirement & Investments.
3. Expand the section and click Start to the right of Traditional and Roth IRA Contributions. 
4. Check the type of IRA accounts you have.
5. Continue answering the questions about contributions you made in the past until you reach the end of the section.