determining basis with a Roth conversion & SEP IRA
Can a client make a non-deductible IRA contrib & convert 100% of the non-deductible IRA basis into the roth & exclude the basis of the SEP IRA in the calculation…ex. client currently contributes to the SEP IRA, current SEP balance is 500k, client makes a 5k non-deductible IRA, can we convert the 5k to the Roth IRA without aggregating the SEP IRA into the calculations to determine the basis.
Permalink Submitted by Anonymous (not verified) on Tue, 2010-06-08 13:25
Sorry, No.
Tax Form 8606 will force you to include all IRAs (SEPs are part of that pot) and calculate the pro-rata amount. In your example, about 99% of the 5K conversion is taxable.
pko