Inherited IRA and Roth Conversion of non-deductable IRA
I have an inherited IRA (250 K). I would like to establish a non-deductable IRA this year and then convert it to a Roth. I have no other IRAs. Can I do this without paying additional taxes other than that already paid on the money I will use to fund the non-deductable IRA – or do I have to consider the inherited IRA as part of a proportional share calculation? I understand that you cannot cherry pick only your non-deductable IRA to convert – but I also understand that I cannot convert an inherited IRA.
Permalink Submitted by Alan Spross on Wed, 2010-02-24 00:22
You are correct. The inherited IRA cannot be converted and neither does it count in calculating the amount of non deductible contributions for your owned IRA accounts. While the inherited IRA could have basis from non deductible contributions also, those are not combined with any non deductible contribution amount for your owned IRA accounts. A separate Form 8606 would apply for each of them, if applicable.
Since you have no other owned IRA accounts, your conversion of the non deductible contribution (for 2009, 2010 or both years) would be tax free.
None of this affects the RMD you must take from the inherited IRA, which I assume is from a non spouse.
Permalink Submitted by Alan Spross on Tue, 2010-03-02 20:42
The calculation is limited separately to each spouse’s IRAs. Note that Form 8606 is used to report conversions or distributions, and it holds only the SSN of the spouse owning the IRA. This applies regardless of filing status.
If your question relates to a conversion prior to 2010, the married/separate status will not eliminate the conversion if they did NOT live together at any time during the year. The 100,000 MAGI limit would apply.