FACTS:

Client age 57, single, employed and contributing maximum each year to 401k plan, around $500k W-2 income most years. Client plans to work 15 more years.
Inherited IRA $134,000
Traditional IRA $243,000 (all deductible contributions)
Roth IRA $12,000
401k $130,000

STRATEGY:
Would like to make a 2019 back door Roth IRA contribution taking the following steps:

1. Via direct transfer rollover the proceeds of the $243,000 Traditional IRA to the existing 401k plan, thus making the Traditional IRA balance $0.

2. After step 1 complete, and prior to April 15, 2020, contribute $7,000 to a 2019 Traditional IRA.

3. Immediately convert the Traditional IRA to a ROTH IRA prior to April 15, 2020. When this is done will be taxed on any gain. However, since the $7,000 will be invested in cash inside the Traditional IRA, and since the conversion will take place within a few days of the contribution, there will be next no taxable gain.

QUESTIONS:

1. I am assuming that because the Traditional IRA balance will be $0 at the time of the Roth IRA conversion, the only potential tax liability on the Roth conversion would be on any growth of the $7,000. Do you concur?

2. I am assuming the Inherited IRA Balance is not considered in the Roth conversion. In other words none of the Inherited IRA Balance needs to be converted. Do you concur?

3. Let’s assume that $20,000 of the $243,000 Traditional IRA are non-deductible contributions. Let’s assume the gain/earnings on the $20,000 to be $10,000. I would assume the most efficient strategy would be to rollover the entire $243,000 traditional IRA to the 401k, which would include both deductible and non-deductible contributions and earnings. Then, when distributions are eventually made from the 401k, that the exclusion formula be used to calculate the non-taxable portion of the distribution. I’m curious if there is any compelling reason to separate out now, at the time of this Roth IRA conversion, the non-deductible contributions plus earnings portion.