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Posted by Jane on March 7, 2008, 5:26 pm
Please log in for more thread options > Jane wrote:
> > I have a traditional non-deductible IRA. It is currently in a bank CD
> > that is coming due. I opened it with $2,000 in 2003. I also have a
> > rollover IRA and a ROTH IRA, both with Vanguard.
>
> > I'd like to take the bank CD and put it in the ROTH. What will that
> > mean in taxes? I know I have to pay tax on the earnings but what
> > about the original $2,000? When I opened this IRA I filed form 8606
> > with my return.
>
> The non-deductible basis will be prorated across your total non-Roth IRA
> balance. In other words, for tax purposes you can't specify that it is
> just the CD that you want to convert.
>
> Suppose you have $100K total IRA balance, and $2K basis
> (non-deductible). If you convert $1K to Roth, of that amount $20 will
> be non-taxable and $980 taxable.
>
> Now, if in the same year you make the conversion, you also make a
> deductible contribution and no other distributions, there's a worksheet
> 1-5 in Pub 590 that leads you to include a much higher percent of the
> non-deductible basis in your conversion.
>
> -Mark Bole
>
> --
> << ------------------------------------------------------- >>
> << 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. >>
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Thanks Mark. My plan is to contribute only to my ROTH this year. For
me that's as much tax confusion as I can handle.
========================================= MODERATOR'S COMMENT:
When responding please only include those parts of the prior post as is
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--
<< ------------------------------------------------------- >>
<< 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. >>
<< ------------------------------------------------------- >>
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