Allocate LOSS to after-tax contributions

[Guest esi-jht]

If a participant's total account includes 1,000 of employee after tax contributions, 1,000 of Employer PS contributions and a loss of 200.00 how is the cost basis of the 1800.00 determined? I'm trying to find authority for allocating the loss to the after tax amount and reporting nontaxable amount on the 1099R as 900.00 versus the 1000.00. Any thoughts?

[Guest Harry O]

You won't find any such authority. The cost basis is $1,000 and the employee pays tax on $800 of income.

[Guest esi-jht]

Thank you. Can you direct me to the authority for that? I've looked at Pub 575, Code Section 72, Regulations for 72. I'm just not finding exactly what I need. Thank you again.

[rcline46]

Earnings are allocated pro-rata to the various accounts. Distributions from the after tax account would normally prorata cost basis and earnings. In your posited case the entire account is less than the cost basis, therefore all distributions are of cost basis only.

You will NEVER find any IRS or DOL authority as said by Harry-O. This is just plain proper administrative procedures.