Is it correct that one does not pay capital gains--and also cannot deduct losses--on stocks and options that are held in one's IRA?

Zip Code: 23227

Yes, your statement is correct.

Money invested in an IRA grows tax deferred. That's the good news. So you owe no taxes on any investment income or capital gains earned within your IRA accounts.

The bad news is that if you lose money within these accounts, you can't deduct those losses on your tax return.

The one exception that I'm aware of is if you make non-deductible IRA contributions, or have contributed to a Roth. Since you've contributed after-tax dollars to these accounts, if you lose most or all of the money invested, you get to claim a miscellaneous itemized deduction equal to the difference between the money withdrawn from the IRA or Roth IRA, and the amount of contributions you made into that account (which is your basis in the IRA). For this strategy to work, you need to withdraw any remaining money from the IRA account.

Zip Code: 01801