Converting nondeductible IRAs
Do pro-rata rules apply to Roth IRA assets? For example, a client plans to fund a nondeductible IRA each year and then convert it to a Roth. Do the converted
assets count in the IRA total rendering subsequent conversions partially taxable?
Permalink Submitted by Alan Spross on Thu, 2010-09-16 21:22
No. The converted assets are in the Roth IRA and do not count toward the traditional IRA balances in years AFTER the conversion. If you have no other TIRA accounts except the non deductible contribution and you convert the non deductible contribution right away, all your conversions will be tax free since you will not have accumulated any earnings or deductible contributions in your traditional IRA accounts.