Roth Conversion question

Submitted by Mark Hilgenberg on Tue, 2008-02-19 22:59

Wife has a $40k IRA with a $14k after-tax contribution basis. Her husband died and she will be rolling his IRA’s into her name.

Can she convert her IRA to a Roth first and keep the higher basis percentage or will his balances be added in?

Thanks,

Mark

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Permalink Submitted by Alan Spross on Wed, 2008-02-20 03:29

She would have to convert her IRA in a year prior to the year she assumed ownership of his IRA either by action or by default.

Even if she converted now, but prior to year end rolled his IRA into hers, her year end balance would include the value of his IRA and dilute her basis. Of course, if his IRA contains any basis she would also receive that basis.

Therefore, she might wish to wait until next January to assume ownership of his IRA, although she must take and RMDs that he failed to take, and from her IRA she must take her RMD before converting.