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Roth Conversion Question


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Last year, I had significant capital losses in a cash management account held at Merrill Lynch.  I used the $3,000 last year as a way to reduce my taxable income and I still have several thousands that I can roll into 2019 tax year.  My question is, can I use those losses to offset a conversion of funds from my traditional IRA to my roth IRA?  Assuming I transfer 10,000 dollars from my traditional IRA into my roth, and assuming I have a tax rate of 25%, that $2,500 would essentially be nullified by my $3,000 capital loss carryover?  Am I correct with this assumption or do the capital losses have to come from one of the ira accounts?

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  • njkotz28 changed the title to Roth Conversion Question

There is no connection between the ordinary income from a distribution from a traditional IRA and the deduction for capital losses except that they each contribute in their own respects to taxable income -- increasing it or reducing it.  You can look at the deduction as an offset to the income, but you could be fooling yourself by missing the big picture and the possible effects of other tax phenomena, such as rules relating to quarterly tax payments.

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