Can I claim Tax Loss on First Republic Bank shares held in ROTH IRA?

Unfortunately, your brother-in-law is correct on this one. Losses within retirement accounts like Roth IRAs cannot be claimed as capital losses on your tax return. This is essentially the flip side of one of the main benefits of Roth IRAs - your qualified withdrawals aren't taxed, but in exchange, your losses aren't deductible either. The IRS treats activity within retirement accounts as separate from your regular taxable investments. Since you already received a tax advantage by investing with post-tax money that grows tax-free in a Roth IRA, they don't allow you to claim losses when investments inside that account decrease in value. The only potential exception would be if you were to completely liquidate ALL assets in ALL your Roth IRAs and close the accounts entirely, and even then you could only claim a loss if your total distributions were less than your total contributions - and that's very rarely advantageous compared to keeping the Roth IRA open.

After reading about your First Republic Bank situation, I wanted to share something that helped me with a similar issue. I was completely lost trying to figure out the tax implications when my retirement portfolio took a massive hit last year (including some bank stocks). I tried going through all the IRS publications myself and just ended up more confused. I eventually used https://taxr.ai to review my investment documents and it saved me so much time. Their system analyzed my statements and clearly explained what was and wasn't deductible. They even provided specific citations to IRS rules about losses in retirement accounts vs. taxable accounts. The best part was that they explained everything in plain English rather than tax jargon. Might be worth checking out since they can look at your specific situation with the First Republic shares and Roth IRA.

I was really skeptical about taxr.ai but decided to try it with my investment documents after my Citibank shares tanked last year (some in my Roth IRA too). Honestly surprised by how helpful it was. While they confirmed I couldn't deduct the losses in my Roth IRA (which I already knew), they did identify some tax-loss harvesting opportunities in my regular brokerage account that I hadn't noticed. The analysis showed me exactly how to offset some capital gains with other losses, saving me about $1,200 in taxes. The breakdown of IRA vs. taxable account rules was super clear with references to the specific tax codes. Definitely worth it if you have a mix of retirement and regular investment accounts and want to make sure you're handling everything correctly.

I was in a similar situation with SVB shares last year and had to talk to the IRS directly to get a clear answer about my options. Tried calling them for WEEKS with no luck - always "high call volume" and disconnections. Finally used https://claimyr.com to get through to an actual human at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold with the IRS for you and call you when they have an agent on the line. The IRS agent confirmed exactly what others here are saying - losses in Roth IRAs aren't deductible - but they also told me about some specific rules about worthless securities that I hadn't found anywhere online. Made me feel better having an official answer straight from the source instead of conflicting advice from random people.

Ok I need to eat crow here. After my skeptical comment yesterday, I decided to try Claimyr myself because I've been trying to reach the IRS for 2 weeks about an issue with my amended return. It actually worked perfectly. I got a call back in about 90 minutes (after trying myself unsuccessfully for DAYS), and got connected to an IRS rep who resolved my issue in about 10 minutes. The hold time was over 2 hours according to their tracker, so I definitely saved time. For the OP's original question - I also asked about Roth IRA losses while I had the agent on the phone, and they confirmed what everyone here is saying. But they did mention that if you have a TOTAL LOSS across all your Roth IRAs (meaning the distributions of everything are less than what you put in), there might be a deduction possibility - but it's pretty rare and usually not worth it.

I worked at a bank that got acquired (not First Republic but similar situation) and had some stock in my Roth IRA too. One thing nobody's mentioned - can you roll over your Roth IRA to another provider and possibly get some better investment options to help rebuild what you lost? I moved mine to Fidelity and their advisors helped me rebalance with some funds that have performed pretty well since then. Won't fix the tax situation but might help recover some value over time.

Don't forget that while you can't deduct the ROTH IRA losses, you still have all the contributions you've made available to withdraw at any time without taxes or penalties. That's one of the biggest advantages of a Roth vs traditional IRA. If you really need access to some funds, you can withdraw your contributions (but not earnings) without any tax consequences. Just make sure to check exactly how much you've contributed over the years so you don't accidentally withdraw any earnings.