I have a slight modification to the example I posted yesterday. See the original post below.

Here’s the modification… Fidelity, the 401(k) provider is stating that they DO accept a rollover of non-deductible basis into their 401k plan.

1) does that change the answer to the pro-rata rule treatment below?
2) are there any issues here?
3) does the IRS allow non-deductible basis to be rolled into the 401(k)?

Thanks for the help.

Submitted by advisor2468 on Tue, 2018-10-23 11:02
Forums:
IRA Discussion Forum
James has a Traditional IRA with $250,000 and $50,000 in basis.
His wife, Jill has a Traditional IRA valued at $50,000.

On 11/15/18, James transfers $200,000 of IRA (non-basis) funds to his employer’s 401(K) – it does not allow basis.

On 12/1/18, James converts his $50,000 IRA (all basis) to a Roth IRA

On 1/15/19, James completes an in-service withdraw of $1m out of his 401(k) into a Traditional IRA.

James ends up with a $50,000 Roth IRA and a $1m IRA and does not owe any tax on the conversion.

Is this sound thinking and legal? Am I missing something?