Employer plans 401(k) and losses

[cientax]

are losses in an employer retirement plan such as 401(k) deductible to the employee participant if the employer matches contributions? If they are how would they be treated on the tax return? Have a client coming in saturday and asked this question yesterday.

[kcjenkins]

No, losses in a 401K are treated just like gains in a 401K, not taxable or deductible.

Only way to take a loss is if the t/p cashes out his entire 401K, and actually ends up with a 'real' loss, not just a drop in value. IE if he put in $40K over the years, and at 1/1/08 it was worth $150K and now it is worth only $75K, he feels like he lost $75K, but in fact, he's still got an untaxed gain of $35K in there.