non-deductible ira conversion

Submitted by Tom Rush on Thu, 2013-04-11 14:04

I have a CPA that is telling me that if a non-deductible IRA is made in a separate account because of income limits and that account gets converted to a roth ira right away (assume no gain or loss) that the cost basis is calculated by including all their other IRA accounts. I believe that the other IRA accounts are irrelevant on the cost basis on the conversion.

Thanks Tom “Big Daddy” Rush



Submitted by Alan - IRA critic on Thu, 2013-04-11 22:31

The CPA is correct. The taxable amount of any conversion is calculated on Form 8606 and includes the values of all your non Roth IRA accounts. Therefore it does not matter whether you make the non deductible contribution to a separate account or to an existing account and whether the conversion comes from the separate account or the other account.



Submitted by Tom Rush on Fri, 2013-04-12 13:49

So they have another ira account that didn’t come from non-deductible contributions. If I convert an non-ded. IRA kept in a seperate account to a roth. The other IRA needs to be considered for the cost basis on the conversion?



Submitted by Tom Rush on Sat, 2013-04-13 13:41

I had follow up question



Submitted by Alan - IRA critic on Sat, 2013-04-13 18:27

Yes, all IRAs that are not Roth IRAs must be included on Form 8606 (line 6) after which the taxable amount of a conversion is considered.



Submitted by Tom Rush on Fri, 2013-04-19 13:17

Does this included simple ira’s?



Submitted by Tom Rush on Fri, 2013-04-19 13:17

Does this included simple ira’s?



Submitted by Alan - IRA critic on Fri, 2013-04-19 18:34

Yes, it includes both SEP and SIMPLE IRAs as indicated on line 6 of Form 8606.



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