Deferral of the taxes on 2010 conversion
I am a little lost on this one. In fact the more I think I know the more I seem to misunderstand about the ROTH conversion/ 5 year wait etc etc… Trying to read up. However, I have not seen this in my search and apologize if I missed it.
I know that if a conversion is made in 2010 that taxes can be deferred to the 2011 and 2012 returns. However, being so, can I not pay some now in 2010 and deferrer the rest? i.e. 3 years spread? I am guessing it’s an all or nothing decision. Either in 2010, or opt for two year option in 11,12…?
Permalink Submitted by Joseph Arsenault on Tue, 2009-12-01 19:30
You are correct, it is all or nothing.
You either recognize 100% of the income in 2010, or you make an irrevocable election to recognize 50% in 2011 and 50% in 2012.
-J
Permalink Submitted by Alan Spross on Tue, 2009-12-01 22:05
A preferable description would be:
You either recognize the conversion income 50% in 2011 and 50% in 2012, or opt out no later than the extended due date and report the entire conversion in 2010. Any decision becomes irrevocable on the extended due date, but can be amended prior to that date.
Permalink Submitted by Joseph Arsenault on Tue, 2009-12-01 22:33
Correct.
The decision does not become irrevocable until the extension deadline.
-J