In 2009 my wife and I rolled over our traditional IRA into an annuity IRA. The base cost of the annuity lost over $19,000 each. How do we claim this loss on our income tax?

Knoxville, TN CPA Andy Ellis answers questions for knoxnews.com and writes: A: The tax consequences from investing in annuity contracts can be very difficult to navigate. I am sorry to hear that you have lost money on these investments. You will pay less in tax as a result of these losses, but it may not feel like it. There is no way to deduct these losses on your 2012 income tax return. Unless the contracts have been sold, you have unrealized losses. Unrealized losses cannot be deducted until the investment is actually sold or otherwise disposed of. In this case, you will never be able to deduct the losses. If these annuities were funded with pretax dollars that were originally invested in your traditional IRAs, your benefit will be recognized when you start receiving payments from the annuity contracts. You will pay less tax because the payments you will receive will be smaller. The opposite would also be the same. If these annuities would have increased in value, you would pay more tax because the eventual larger distributions would be taxable. So, you do get some tax benefit from these losses, but there is nowhere to claim it this year.

Another.....

Q: I recently inherited my parents’ house. Will I have to pay income tax on the proceeds when I sell it? If so, how where do I report it. It was appraised for probate.  

A: You may or may not have to pay income tax on the proceeds from the sale of this inherited property. You will not have to pay income tax simply for inheriting the house, though. Any “inheritance” tax due on a large estate is paid by the estate. So, the tax is already taken care of before the inheriting taxpayer receives the property. The tax due on the proceeds will depend on whether or not you have a capital gain or loss on the sale. You will need to start with the amount of proceeds realized from the sale. You are allowed to deduct your inherited basis in the property, any additional money invested into the property during the time you owned it, and any expenses incurred with selling the property. You may owe tax if the result is a capital gain. If the result is a capital loss, you may have a deduction to take.