conversion to Roth
Suppose I have a TIRA with $100,000 in 5 mutual funds, 4 with gains and 1 with substantial losses. Can I convert to a Roth using only the fund with losses and keep the funds with gains in my TIRA or must I prorate the dollars converted from all 5 funds? JDH
Permalink Submitted by Alan Spross on Mon, 2009-06-22 01:31
You can convert using any combination of the funds you wish, but it makes no difference tax wise which funds you choose. Gains or losses in individual investments in an IRA have no bearing on the tax bill for a distribution or conversion. The conversion would be fully taxable unless you made prior non deductible contributions to the TIRA and reported them on Form 8606. You should choose the investment that has the best chances for gains to convert if you want to convert the same holdings, but you can buy and sell within an IRA with no tax impact. Therefore, if you think any of these holdings do not have potential, you should simply sell them and replace them.
If commissions or loads are involved, better to make the changes before converting so that the commisions come out of the TIRA rather than the Roth IRA.