How do I report a loss due to the return of a excess contribution to a traditional IRA taxable in 2017?

[cacarson12]

I received a 2017 1099-R for a traditional IRA for excess deferral contribution.  Box 1 = $6414, Box 7 has an 8. The contribution was for $6500,how do report the loss of $86.00?  The excess contribution was made and returned in the same year (2017) before the tax filing deadline.  Form 1040, Line 15a correctly shows that the $6414 is not taxable, but the 1040 does not show the loss of $86.00.  Note:  I am not eligible for the IRA deduction. The Step-by-Step questions do not appear to address this situation.  Please assist.

Follow-up question.  For tax years 2015/2015, I had a similar situation, but it was a return of an excess deferral contribution from a 401K. In that case, my 1099-R Box 7 had a "P" and I was able to claim the loss on the 2016 return. Based on your answer, the IRS allows you to claim losses on excess deferral contributions to a 401K, but not on excess contributions to a traditional IRA. Is that correct? If so, I don't understand the difference. Do you? If so, can you please help me understand? Thank you.

[cacarson12]

Follow-up question. For tax years 2015/2015, I had a similar situation, but it was a return of an excess deferral contribution from a 401K. In that case, my 1099-R Box 7 had a "P" and I was able to claim the loss on the 2016 return. Based on your answer, the IRS allows you to claim losses on excess deferral contributions to a 401K, but not on excess contributions to a traditional IRA. Is that correct? If so, I don't understand the difference. Do you? If so, can you please help me understand? Thank you.

[AmandaR1 · Accepted solution]

You cannot deduct a loss related to a return of excess contribution (even though the value decreased) because it wasn't qualified to begin with. 

[cacarson12]

Thank you for your response.  I have a follow-up question regarding your answer.  Since I am not sure where to add,  I will put it with my initial question.