Dear Harry: I rolled over my company's pension plan to an IRA back in 1987. The value was then $7,700. I cashed it in in October for $19,450. That's a profit of about $12,000. I then invested the $19,450 and sold it for $15,000 in January. On last year's tax return, I reported the profit and paid the penalty as well as the tax. Since I lost $4,450 on the sale, can I now go back and file a new return for 2008 and use the loss to offset the profit and penalties? I'm 55 and still working.

What Harry says: You made one big mistake when you liquidated your IRA, then several little mistakes afterward. Apparently you did not have a dire need for the money because you kept it invested. As a result, you got hit for the tax and penalty last year that you could have avoided witha rollover. The sale in January gave you a capital loss for this year (2009), and it may not be used to offset the IRA gain in 2008. You may use it to offset this year's capital losses and beyond that to deduct against other income to the extent of $3,000 of any remaining loss. Someone should have advised you against liquidating the IRA.i

Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130.