1. There must be basis (the IRA must contain non-deductible IRA
    contributions or after-tax funds transferred into the IRA from a company plan). All funds contributed or converted to Roth IRAs
    are basis.
  2. Roth IRA: All funds from all Roth IRAs must be withdrawn. Traditional IRA: All funds from all traditional IRAs (including any SEP or SIMPLE IRAs) must be withdrawn.
  3. The amount of the basis (the nondeductible contributions) must exceed the amount withdrawn.
  4. Must itemize deductions (as opposed to taking the standard deduction). The loss is claimed as a miscellaneous itemized
  5. The total of all miscellaneous itemized deductions (including the IRA loss) must exceed 2% of AGI.
  6. Must NOT be subject to the alternative minimum tax. The loss deduction is lost if subject to AMT.

Even when these six tests are passed, for those under age 59½, Roth IRA distributions could be subject to the 10% early withdrawal penalty if converted Roth IRA funds are withdrawn within five years of the conversion

IRS Publication 529
IRS Publication 547
IRS Publication 564
IRS Publication 590 A and B