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If I converted, what would be the tax liability? $873.81? ($2873.81 - the $2000 nondeductible contribution?) $2000? (The full value of the deductible contribution?) Would it be the current market value of the 2000 contribution?

The amount taxable will the FMV - an nondeductible contributions on the date of conversion, if this is your only IRA. Otherwise you will have to do prorating of your nondeductible contributions between the amount converted and remain Traditional IRA.

Thanks Paul. This is my only IRA, so if I read you correctly, if the FMV is $2873.81, and I had a $2000 nondeductible contribution, then conversion would produce $873.81 of taxable income? If this is the case, then conversion certainly does seem to make sense.

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