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If an excess distribution is made from a Roth IRA-lower than the contribution, can a capital loss be recorded?


Example:
Dec 2007: $4000 Roth IRA contribution made in fund XYZ
Jan 2008: Value of investment in fund XYZ falls to $3500. Determined that $4000 was an ineligible contribution so $3500 is withdrawn.
April 2008: $500 capital loss for tax year 2007?

Not unless you closed out *all* of your Roths.

See publication 590 for a worthless itemized deduction that year. (The loss wouldn't go on schedule D, but schedule A in the 2% section.)

A capital loss is not reported for money in any kind of IRA.

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