Roth IRA Conversion where traditional IRA has basis

Submitted by [email protected] on Fri, 2008-12-05 15:20

I have a client who will do a partial conversion of a traditional IRA with some basis from non-deductible contributions. How do you treat the basis when you declare the amount of taxable income from the conversion?

Thanks!



Submitted by Alan Spross on Sat, 2008-12-06 00:36

Form 8606 is used to calculate the taxable portion of a conversion in the same manner as a simple distribution. Parts I and II of Form 8606 will apply a portion of the existing basis to the conversion or distribution, and also show the reduced amount of remaining basis. Hopefully, the client correctly filed all prior 8606 forms since these are cumulative and the latest one shows the current remaining basis.

Only the taxable portion of the conversion will end up on line 15b of Form 1040.



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