Inherited IRA and Roth Conversion
I have a client with a 100k Inherited IRA. If he contributes 6k to a non-deductible IRA and then immediately converts the 6k to a Roth IRA, will the full 6k be converted without tax consequences, or will he have to consider the Inherited IRA balance when calculating the tax consequences to whereby roughly 94% of the conversion will be taxable and only roughly 4% non-taxable? If the 94% is taxable, does he maintain the 6k of basis in the Inherited IRA so when he takes withdrawals from the Inherited IRA, some of the withdrawals will be tax free?
Thank you!
Permalink Submitted by mk foss on Thu, 2014-08-21 17:31
The value of an inherited IRA is not considered when determining how much of an IRA converted to Roth is taxable. So if the nondeductible IRA is immediately converted, there should be no tax due. Or very little if it earns something in the few days before the conversion.