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Dangerous 401k Deeds » From: Bristol, CT Dear TaxMama: I read your advice on taking out money from a 401K (or should I say IRA) to pay for a first home purchase. I have lost money in the 401K that I will soon move to the IRA. If I take the distribution for the 1st home purchase, is this a taxable event? AKA can I claim this loss? Thanks taxmama! Miles Dear Miles, Talk about being unclear on the concept. DON'T take the money out, if you are rolling the 401k into an IRA. It only works if you STAY with the company and keep the 401k open. If you move it to the IRA, you've blown it. The losses, unfortunately, you can't do much with that. If you take the money out, take it as a loan - THEN, it's tax free. (See TaxMama's Article in Issue #122, Drawing From A 401k. And be sure to pay it back! Oh, if you take money from your IRA for the first time home purchase. That's fine. But, you WILL pay tax on the $10,000. The only thing you don't pay is the early withdrawal penalty. So, if you can borrow against your 401k, do that - it's free. Best wishes, Eva Rosenberg Your TaxMama

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