Roth Conversion

Submitted by Robert Boyle on Fri, 2019-06-14 15:28

Husband and wife each have non deductible IRA’s of 250K each. Husband and wife have $0 in deductible IRA’s.
All examples on Roth conversion utilize the IRS pro rata rule which does not seem to apply based on there being no deductible IRA’s.
Is the taxable portion of 100% Roth conversion the difference between the non deductible contributions for the past 15 years (basis) and the FMV at the time of conversion?

Thank you,

Robert D. Boyle, CPA



Submitted by David Mertz on Fri, 2019-06-14 15:56

  • If the entire amount of each individual’s traditional IRAs is converted to Roth, resulting in each individual having a $0 balance in traditional IRAs at year-end, the taxable amount of the conversion is determined separately for each individual on Part II of Form 8606 by subtracting that individual’s basis in nondeductible traditional IRA contributions.  The result will be that the taxable amount will be the FMV at the time of the distribution from the traditional IRA minus the basis.
  • (Note that the basis in nondeductible traditional IRA contributions belongs to the individual, not to any particular traditional IRA account of the individual, so there is no such thing as a “nondeductible traditional IRA” even though the individual may have only one traditional IRA.)

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