Grantor Letter from Trust for Bankruptcy of Investment inside an IRA portfolio

[lhleclairjr]

I have an IRA portfolio managed by Kingdom Trust.  Within that portfolio were shares of GWG.  GWG went bankrupt and assets were transferred to a court-ordered GWG Wind-Down Trust.   The Wind-Down Trust notified me by a Grantor Letter (in lieu of a K-1) that I had reportable interest, expenses, and losses for 2024.  Normally, I would ignore this because it is "behind the curtain" of the IRA, and like any other loss of value in an IRA is invisible until I withdraw the funds via 1099R at which time they become ordinary income and are reportable.

My confusion this year is that I have been taking my RMD from my Kingdom Trust portfolio.   The losses for 2024 are roughly twice the RMD I took from Kingdom Trust for 2024 and roughly 25% of the total RMDs I took from all my investment portfolios in 2024.  They are not insignificant.

SO, are the losses still "behind the curtain" and unreportable?  Or, do I report them on this year's 1040 & Sched D?   NOTE: If I need to report them, I believe I know how to enter them in Turbotax, so my question is not HOW TO report, but WHETHER I NEED TO or CAN?.

[SusanY1 · Accepted solution]

Yes, the losses are still "behind the curtain" and unreportable.   If any amounts are recovered during bankruptcy, they should also be deposited into your IRA without any tax consequence.  While the tax deferral in IRAs is a nice feature and the one with which we're most familar, one drawback is that losses such as this are generally not deductible losses.  

[lhleclairjr]

Thanks for the amazingly prompt response.   That's what I thought the answer would be, but I wasn't 100% confident.  Now I am.   THANKS!!!