Form 8606 Line 14 - Losses prior to Roth Conversion

[Zidane]

Hello.

I made a nondeductible $6000 contribution to a Traditional IRA for the first time and invested it, but then did a Roth conversion (I realize now I should have converted before investing).

At the time of conversion I had investment losses so the full conversion was only $5979.  Now when I fill out Form 8606 of my tax return, I am left with $21 on line 14 ($6000-5979) even though there is really $0 remaining in the traditional IRA.

Am I stuck tracking this $21 basis forever or is there some way to cancel this out by noting the losses?

Thank you.

[DaveF1006]

Yes, just report the full conversion at $6000 even though there is a small loss. 

@Zidane 

[ Edited 02/18/22| 05:31 PM PST]

[Zidane]

When you say “report the full version at $6000” which line of the 8606 are you referring to?

[DaveF1006]

I apologize. I met to report the full conversion of $6000. 

[Zidane]

Thank you @DaveF1006. Will there be any issues if I report a $6000 conversion and it doesn’t match the $5979 listed on the 1099-R that is reported to the IRS?

[fanfare]

when  you convert the entire amount of your IRA ( as in a Backdoor Roth conversion) your basis should (has to)   go to zero. You're entering something wrong.

[dmertz · Accepted solution]

Since the miscellaneous deduction for unrecoverable basis has been suspended until 2026, yes, you still have $21 of basis in nondeductible traditional IRA contributions carrying forward that can be applied to some future distribution that you make from a traditional IRA should you ever make a deductible traditional IRA contribution or have investment gains in a traditional IRA in the future.

In 2026 when miscellaneous deductions subject to the 2% of AGI floor are reinstated, you might be able to claim a deduction of $21 on 2026 Schedule A.

[Zidane]

@fanfare The entire converted amount is less than the original contribution due to the investment losses, which is why the basis is not 0.  I believe it has been entered correctly.

[fanfare]

Well then, make a contribution to an IRA of $21, take a deduction for it,

then convert the IRA to a Roth IRA.

That is, if you can find a custodian who will start an IRA for $21.