IRA to Roth Conversion
Is there any advantage to transferring IRA stocks (at a loss) to a converted Roth IRA instead of selling them first and just converting cash (other than selling commissions)? I would be converting with the same broker. Thanks. [/list]
Permalink Submitted by Alan Spross on Wed, 2008-08-20 03:58
It’s not clear whether you intend to re purchase the same stock in the Roth if you sell it before the conversion. If you do, there is no difference other than avoiding commissions on both ends.
If you do NOT re purchase, then there is no difference between an IRA and a taxable account in that if the stock recovers, then you sold low and if it does not, then the sale provided an opportunity to make a new investment decision.
Since individual stocks are more volatile than mutual funds or ETFs, one conversion strategy involves converting various stocks into different Roth accounts with the idea that at least one of them will have decent gains. If you get those gains, you retain that conversion and recharacterize the others. The earnings calculation will not be on a commingled basis since each conversion was done into it’s own Roth account holding only that one stock. Of course, you can do virtually the same thing by converting cash and then buying the stock of your choice as soon as the conversion is done.