Long Term Losses Used to Offset Capitol Gains in Conversion of IRA to Roth

[rsouviney]

Poll question: Long Term Losses Used to Offset Capitol Gains in Conversion of IRA to Roth

Can someone help me find an answer to this question: Can I use long term capitol losses generated by my after tax investment account, which I seem to have a lot of these days, to "offset" the capitol gains that I will need to pay if I convert my IRA to a RothIRA in 2009 or more likely in 2010? Long Term Losses can only offset up to $3000 of regular income each year as you probably already know, but I was hoping to use these long term losses to offset the gains in my IRA when I convert it to a RothIRA in 2010. Thank you in advance for any help you can provide.

[A HERETIC I AM]

1. Converted amounts are not taxed as capital gains, they are taxed as ordinary income.

I assume you are going to wait until 2010 because your AGI is above the current limit for conversions ($100,000 and the limit goes away for 2010 and only 2010). If it isn't, you could convert half this year and half next year. The only other restriction to conversion is if you are married and file separately.

Any amount held in an IRA that is converted is not treated as capital gains, even if most of the amount is gains. The only taxation exception is if you had non-deductible contributions to your IRA.

IRS publication 590 discusses IRA's and Roth conversions and pertinent information regarding conversions are mentioned on pages 23, 40 & 64
http://www.irs.gov/pub/irs-pdf/p590.pdf

Here's an HTML copy of 590 with a hyperlinked index page;
http://www.irs.gov/publications/p590/index.html

In short, the answer to your primary question is "no".

That's probably not the answer you were hoping for, but I hope that helps a little.

[rsouviney]

2. Thank you for the information

I appreciate the info even if it isn't what I was hoping...and I'll look at 590 again...randy

[Strong Atheist]

3. Welcome to DU!

:toast: