Inhertied IRAs used in calcualtion of ROTH IRA Conversions

Submitted by Marc Schain on Tue, 2017-02-21 16:28

Is the value of an inherited IRA used determining the taxable amount of an IRA conversion. My client has no traditional iras but has an inherited ira. every year he contributes $6,500 as a nondeductible ira contribution and immediately turns around and converts it to a ROTH IRA. My tax software wants to know the value of all iras. Do I need to include the value of the inherited ira.



Submitted by Alan - IRA critic on Tue, 2017-02-21 17:40

No, do NOT report the value of any inherited IRAs. The back door Roth conversion will accordingly be tax free. If he acquired basis in the inherited IRA, that basis is never mixed with the owned IRA basis. A separate 8606 would apply to each.

Submitted by Marc Schain on Tue, 2017-02-21 19:03

Thanks Alan.  Worked out great

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