I have a client that owns an IRA with both pre and after tax contributions in it. Come January we plan to Convert it to a Roth IRA taking advantage of the After tax portion to limit the tax consequence.

Problem comes in later in the year(summer), his profit sharing plan is going to be terminated. We will need to move those assets into a traditinoal IRA at that time.

It is our understanding that if there were simply 2 IRAs in existance at the same time, one with after tax contributions and one without, the nondeductible portion would need to be aggregated across both IRAs for purposes of the Roth conversion.

However since we will be converting the IRA with after tax before the profit sharing plan will be moved to an IRA, Do we avoid the aggregation? Are they 2 seperate events? Or come Tax time will the 2 events be considered as being with in the same calender year and hence aggregation would apply?

Our fear is that we think we are saving the client taxes at conversion, only to have to pay them anyway when they do their taxes?

We have heard multiple opinions that substantiate our plan, but they always defer to a tax professional. Any feedback would be helpful and appreciated.
Thank You

Mike Sheehan