Conversion clarification
A couple of quick conversion questions. A client converted part of his IRA to his Roth IRA earlier this year. He has since passed away. I assume that when his wife files their 2010 return she still has the ability to chose between reporting the income on their 2010 return or waiting and splitting it between 2011 and 2012. I also assume that once the IRA has been transferred into her account, if she elects to convert part of it into her Rothprior to 12/31,she can still make the opposite choice as she makes for her deceased husband (e.g. can elect to report his conversion on their 2010 return and then elect to report hers on her 2011 and 2012 return). Please verify.
Thanks in advance and Happy Holidays.
Glenn
Permalink Submitted by Alan Spross on Tue, 2010-12-07 19:18
Glenn,
Yes, she still has the option to recharacterize the conversion and to choose the two year deferral or full 2010 reporting, with the final decision date being 10/17/2011. If she defers, the income will be reported on returns when she will likely be filing single and that will result in higher tax rates.
I am not aware that your other question has been addressed in the tax code or IRS Regs regarding 2010 conversions. However, since their two conversions would be reported on separate 8606 forms (one for each SSN), the reporting of of a different option for her conversion than for his would flow smoothly under the reporting convention that we have, and would most likely be acceptable to the IRS.
Not sure I understand what you meant with “if she elects to convert part of it to her Roth” as assumption of ownership would include the entire balance and some Roth agreements make a sole surviving spouse the automatic owner and not the beneficiary. In order to avoid looking at several variations here, assuming that the order of events is first his conversion, then his death, then her assumption or full rollover of his Roth, and finally her conversion from either her own TIRA or his TIRA assumed by her. Each spouse would then have a 2010 conversion and she would control the options of recharacterization and election of the taxable years for each spouse’s conversion income. It should also work if she converts into her own Roth and maintains the Roth she inherited and assumed separate from her own Roth conversion.