Excess Contribution - Loss on Roth refund

[Lou S.]

OK, plan failed ADP test and made refunds from all roth-K source on 3/14/2009 for calander year 2008 test failure.

Roth - Deferral to correct, $1,000

Loss on Roth Deferral, $200

Check to Participant $800

I get the 1099-R ($800 box 1, $0 box 2a, $1,000 box 5) reporting and that the participant has no taxable income on this distribution because it is 100% Roth-k with no gain. The question is can the participant claim the $200 loss on his/her 2009 tax return?

I'm pretty sure the answer is yes they can but if anyone can point me to any specific IRS guidence confirming this I'd be very appreciative.