Any Holding Time for an IRA before Convertion to Roth?

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Posted by alex on February 2, 2010, 6:37 pm Please log in for more thread options If I contributed to an IRA today when can I converted it  to a Roth IRA? Tomorow, 30 days, ...? Thanks,  Alex -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by JoeTaxpayer on February 2, 2010, 7:02 pm Please log in for more thread options On 2/2/10 6:37 PM, alex wrote: > If I contributed to an IRA today when can I converted it  to a Roth > IRA? Tomorow, 30 days, ...? > Thanks,  Alex No. Just long enough to count as part of the non-deducted and pretax prorating. e.g. you have $8000 in pretax IRA, this year you deposit $2000 post tax, the conversion is considered 20% post tax money/80% pretax. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by rick++ on February 3, 2010, 12:05 pm Please log in for more thread options > No. Just long enough to count as part of the non-deducted and pretax > prorating. e.g. you have $8000 in pretax IRA, this year you deposit > $2000 post tax, the conversion is considered 20% post tax money/80% pretax. A technicallity- the pro-rating is done on the Dec 31 value of all regular IRAs, not on any of the days you did the conversion.  I was surprised when I filled out a 8606 for a 2009 conversion. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by Tom Russ on February 3, 2010, 6:44 pm Please log in for more thread options > A technicallity- the pro-rating is done on the Dec 31 value of all > regular IRAs,  not on any of the days you did the conversion. > I was surprised when I filled out a 8606 for a 2009 conversion. I can see the logic, especially since IRAs are not normally priced on a daily basis.  The only definitive statement is the Form 5498(?) statement you get each year. I haven't looked at 8606, but I presume that it must have some provision for current-year contributions as well.  Otherwise I can't see how it would work at all. Consider:   The previous year's traditional IRA value is $15,000.  Let's assume that this is all non-deducted contributions (all earnings were balanced out by the recent market decline).   This year you add in $5,000 and deduct it.   Then you convert the entire $20,000 to a Roth IRA.  So at the end of this year you have $0 in the traditional IRA.   So what part of the conversion is considered taxable?  Logically it should be 25%, but how does one get there from the year end values? -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by removeps-groups@yahoo.com on February 7, 2010, 2:58 pm Please log in for more thread options > > A technicallity- the pro-rating is done on the Dec 31 value of all > > regular IRAs,  not onanyof the days you did the conversion. > > I was surprised when I filled out a 8606 for a 2009 conversion. > I can see the logic, especially since IRAs are not normally priced on > a daily basis.  The only definitive statement is the Form 5498(?) > statement you get each year. > I haven't looked at 8606, but I presume that it must have some > provision for current-year contributions as well.  Otherwise I can't > see how it would work at all. > Consider: >   The previous year's traditional IRA value is $15,000.  Let's assume > that this is all non-deducted contributions (all earnings were > balanced out by the recent market decline). >   This year you add in $5,000 and deduct it. >   Then you convert the entire $20,000 to a Roth IRA.  So at the end of > this year you have $0 in the traditional IRA. >   So what part of the conversion is considered taxable?  Logically it > should be 25%, but how does one get there from the year end values? Here's another example.  Person has no money in IRA's.  On Feb/1/2010 at 1pm they make a non-deductible contribution of $5000 for 2009, at 1:15pm they make a deductible contribution of $5000 for 2010.  At 1:30 they transfer the $10000 into a Roth.  The  value of the IRA no 12/31/2009 is zero; the value of the traditional IRA on 12/31/2010 is also zero. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> This Thread        Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape Any Holding Time for an IRA before Convertion to Roth? alex 02-02-2010  Re: Any Holding Time for an IRA before Convertion ... JoeTaxpayer 02-02-2010  Re: Any Holding Time for an IRA before Convertion ... rick++ 02-03-2010  Re: Any Holding Time for an IRA before Convertion ... Tom Russ 02-03-2010  Re: Any Holding Time for an IRA before Convertion ... removeps-groups@yahoo.com 02-07-2010  Re: Any Holding Time for an IRA before Convertion ... Arthur Kamlet 02-07-2010  Re: Any Holding Time for an IRA before Convertion ... removeps-groups@yahoo.com 02-07-2010  Re: Any Holding Time for an IRA before Convertion ... Arthur Kamlet 02-07-2010  Re: Any Holding Time for an IRA before Convertion ... removeps-groups@yahoo.com 02-08-2010  Re: Any Holding Time for an IRA before Convertion ... Phil Marti 02-10-2010  Re: Any Holding Time for an IRA before Convertion ... removeps-groups@yahoo.com 02-02-2010 Related Posts Subject Date Is Roth Conversion a one time thing? May 18, 2010, 3:16 pm Good time to convert trad. IRA to Roth? November 24, 2008, 2:03 pm Roth distribution for first time (married) home buyers quest... 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