TIRA underwater being converted
Alan ;),
I have a client who is underwater on his TIRA (non-deducted) and would like to convert to a roth. Can the amount underwater offset the conversion?
Alan ;),
I have a client who is underwater on his TIRA (non-deducted) and would like to convert to a roth. Can the amount underwater offset the conversion?
Permalink Submitted by Alan Spross on Tue, 2010-03-09 18:06
If the total 8606 basis is more than the total account value, the conversion will already be tax free. The amount by which the basis exceeds the TIRA value can be considered for a misc itemized deduction if all TIRA accounts are closed through distribution and/or conversion. You must be able to itemize to get any benefit from this deduction, and a 2% of AGI limit applies before the misc deduction can be used.
Remember that all TIRA, SEP IRA or SIMPLE IRA accounts owned by the client must be closed to qualify for the misc deduction.