Albuquerque Journal (Albuquerque, NM)

Handling excess contributions to Roth IRA.

Byline: Your Taxes PATRICA ELLIOTT For the Journal

Q. I have my Roth IRA invested in a global technology mutual fund. I made my $2,000 contribution for the calendar year in January 2000, when technology stocks were still flying high.

My problem is that my wife and I own other mutual funds, not in tax-deferred accounts, which paid rather large distributions at the end of 2000. It now appears that our adjusted gross income may surpass the $150,000 threshold at which the allowable contribution begins to decrease, and may even go past $160,000, in which case no contribution would be allowed for the year 2000.

I understand that I can avoid an IRS penalty by selling the shares originally purchased with the $2,000, plus any that were purchased with reinvested dividends and/or capital gains that resulted from those original shares, before the IRS filing deadline.

My question is, since I am likely to have to sell those shares at a loss, can I declare this as a capital loss on my Federal return? I suspect not, since I know you can't do so with a deductible IRA. …

Log in to your account to read this article – and millions more.