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[JR] Deduction for loss of 401k investment

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  • vernjacobs@yahoo.com
    QUESTION: Could you please tell me whether losses in a 401K plan are deductible from taxes owed? I was 100% invested in the common stock of my employer
    Message 1 of 1 , Dec 16, 2003
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      QUESTION: Could you please tell me whether losses in a 401K plan are
      deductible from taxes owed? I was 100% invested in the common stock of
      my employer (USAirways), when the company declared bankruptcy and the
      stock became worthless.

      REPLY: Income that is used to contribute to a tax deductible and tax
      deferred retirement savings plan such as a 401(k), IRA, SEP, KEOGH,
      etc. is not subject to income tax until the funds are withdrawn. When
      a taxpayer takes distributions from a retirement savings plan, the
      distributions are taxable at that time.

      Losses incurred on investments made within a retirement savings plan
      will reduce the amount of future distributions that are available to
      the taxpayer and become "deductible" in the sense that future income
      is reduced. However, there is no immediate deduction for investment
      losses incurred by a retirement savings plan.

      Vern Jacobs
      www.offshorepress.com/vkjcpa/

      The information herein is not intended to be personal
      tax or financial advice and may not be appropriate or
      applicable for every recipient of this message.
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