Partial conversion of assets from traditional IRA to Roth IRA
If I have total traditional IRA assets of $100k (funded 100% with pre-tax funds) and wanted to convert $10k of it to a Roth IRA, I know I would owe income taxes on the $10k. However, would I additionally owe taxes, under the pro-rata rule, for the $90k that was not converted?
Permalink Submitted by Alan - IRA critic on Mon, 2017-12-18 16:56
No. The pro rata rule applies to IRA distributions when the taxpayer has an IRA basis from non deductible contributions that have been made and reported on Form 8606. Since your IRA is 100% pre tax and you have NO basis, there is nothing to pro rate. And if you did have basis and converted 10k, that would be pro rated and you would not owe tax on the entire 10k.