ROth Conversion basis
Client completed a Roth conversion in 2010 for $15,000(paying tax on it in 2011 and 2012)
Starting basis is $30,000. Husband and wife making Roth contributions this year. How does conversion impact basis? Does a Roth contribution reduces the Roth conversion?
Permalink Submitted by Alan Spross on Thu, 2012-02-23 21:07
Basis in a Roth IRA is the total amount of regular and conversion contributions less distributions taken from these amounts.
Therefore both regular and conversion contributions add to the basis for the Roth IRA. There is no reduction of Roth conversions resulting from a regular contribution, and making a regular Roth contribution now will have no affect on the 2010 conversion or on the taxes due on the 2012 portion of that conversion.
Also, note that the 2012 portion of the 2010 conversion is not counted in modified AGI for Roth contribution purposes. That means that it would not result in an increase in modified AGI that might make the AGi too high to make a regular contribution.
Not sure if this answers your question.