FURTHER PRO RATA QUESTION
DMx, thank you.
I apologize for having to post the same question again as i did some minutes ago in the “Would This Create A Pro Rata Situation?” thread but I’m trying to format this to make my post more readable.
I have 2 questions which I hope you may answer.
1. About the “Backdoor Roth” thread that began 11/3/20 and on which you commented:
It appears to me that the client’s plans involved having, at least briefly in 2020, a balance in a SIMPLE IRA and a contribution to a ND IRA which he planned to Roth convert in 2020.
If these 2 IRA’s are not a pro rata situation, is it because both the SIMPLE IRA and ND IRA balances would be 0 at year-end?
2. With regard to my first post in this thread, “Would This Create A Pro Rata Situation?”:
If the employee Roth converts all of his post-tax ND contribution assets in his TIRA in the same year even though after he rolls his employer plan assets (all pre-tax) into that TIRA, is this still a pro rata situation though the year-end assets of his TIRA would be all pre-tax with 0 post-tax?
If this would still be a pro rata situation, I would appreciate if you could help me understand why.
Thank you.
Permalink Submitted by David Mertz on Thu, 2020-11-05 13:40
1. The pro-rata calculation is still performed, but the zero year-end balance results in *all* of the basis in nondeductible traditional IRA contributions being applied to reduce the taxable amount of the Roth conversion.2. See my reply here: https://irahelp.com/comment/64223#comment-64223 The nonzero year-end balance results in only part of the basis in nondeductible traditional IRA contributions being applicable to the traditional IRA distributions done during the year, with the remainder of the basis remaining in the traditional IRAs. The traditional IRAs do *not* have $0 post tax at year-end in this case.