Here is the set-up. Taxpayer has had a traditional IRA for several years, making non-deductible contributions for approximately 10 years (therefore a total of $20,000 has been contributed.) The monies were invested in a high-risk fund, consequently the remaining balance is about $3,000. He directs the bank that handles the IRA to transfer the funds to a ROTH managed by one of the big investment firms.

I have a suspicion that he has blown the opportunity to claim the $17,000 loss by this direct transfer. I am of the opinion, that the only way to preserve the loss is to take physical possession of the $3,000, and even wait out the 60 day period. Then, open a Roth as usual.

Anyone have any comments? I cannot find anything specific when the Traditional IRA has lost so much and then gets converted.

Thanks.

Ken.