tax date for IRA conversions

Submitted by Ronald Birnbaum on Mon, 2019-04-22 18:43

I want to convert IRA cash to a Roth IRA and then invest a few weeks later into a LP. The LP then gives me an audited estimate to what it is worth. These are raw materials so this figure is worth less than the actual investment. Am I taxed on the new audited value or the value of the cash at the time of the conversion? So if I convert $100k to my Roth, then invest in the lP and a couple months later get an audited valuation of what the shares are worth, can I use this value to pay my taxes? Maybe I have to pay on the $100k? The audited valuation shows the shares are worth $60k. Can I use the $60k figure as my conversion amount?

Thanks.



Submitted by Ronald Birnbaum on Mon, 2019-04-22 19:02

Perhaps you have to do the conversion after the LP issues the valuation.  So you take your $100k and then purchase LP shares.   Then, after the revised valuation from the LP auditing team issues a valuation – then you do the Roth conversion.  In the  example the valuation is $60k.  Thus – you can pay your taxes on the conversion as if you invested $60k, not the original $100k.   Does this make sense??

Submitted by Alan - IRA critic on Mon, 2019-04-22 23:01

You are taxed on the distribution from the TIRA account. Most conversions are done by a direct transfer to a Roth IRA, but even if done by a 60 day rollover you conversion contribution will be the same as the distribution (100k). What you buy in the Roth IRA has no effect on the conversion tax, but if you pay more than the investment is worth, it could be a long time before your Roth IRA has any gains.  You should also be alert  regarding UBIT taxes on your Roth IRA should UBIT reach 1000 per year in the LP. You would get a 1099 should this occur.

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