QUESTION
Can I deduct a loss on my employee contributions in an ESOP distribution
Asked on Feb 16th, 2013 on Taxation - New York
More details to this question:
My former employer had an ESOP program. During some years, employees were allowed to make their own contributions into the ESOP, in addition to the employer contributions. Now, the employer is in bankrupcy and the ESOP has been liquidated at a very low value. I received a 1099-R showing the amount of the total distribution in box 1. It also shows a larger Employee Contribution amount in box 5. Can I deduct as a Capital Loss the difference between the box 5 amount and the box 1 amount?
1 ANSWER
Robert Barnhill III
Paul - yes you can deduct the difference between box 5 and box 1 as a capital loss. You will need to see if you made any contributions in 2012. If you did, you will need to prorate box 1 between the contributions made before 2012 and those in 2012. The contributions made before 2012 will be long-term capital losses and those made in 2012 will be short-term capital losses.
Answered on Feb 18th, 2013 at 10:58 AM