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Subject:  Re: Regular IRA xfer to Roth IRA Date:  8/21/1997  11:56 AM
Author:  TMFTaxes Number:  230 of 120809

<<That is, for example, if you have IRAs in two accounts worth $100,000 (composed of a regular IRA of $50,000 ($10,000 non-deductible) and a rollover IRA (from a 401K) of $50,000), you have to transfer the whole $100,000 over to the Roth IRA account or nothing at all?>>

Nope. Sorry if I implied such. Since you have two separate IRA accounts, they would be treated separately for rollover purposes. But what you could NOT do would transfer only $10k out of the $50k in IRA #1. You would have to transfer the entire $50k.

<<You can't transfer say, just $50,000 over (paying taxes on the 90% that was deductible), leaving the rollover IRA available for transfer into a future 401K?>>

It appears that you CAN do this. Again, since you have two separate IRA accounts, they are treated as being separate for rollover purposes.

<<Or transfer only $20,000 over, leaving $30,000 in the regular IRA and $50,000 in the rollover IRA?>>

This is the question at hand. Just yesterday, I was convinced that you could NOT do this. But in doing a little more research today, it appears that you CAN split out an existing IRA, and only make a partial contribution to a Roth IRA. I'm still not sure, and am not really comfortable with this position. I'll keep reading and (hopefully) we will all receive some guidance from the IRS on this issue before the rollover date (Jan 1, '98) comes about.

But what is very clear, and what will trip up may people trying to make large rollovers will be the $100k income limitation. The law is very clear that any amounts "rolled over" to a Roth IRA will have to be included in gross income, and would therefore be included in the AGI computations for purposes of determining whether the AGI is greater than $100k.

So if you had a $50k rollover that you wanted to make, and also had $51k in salaries, interest, dividends, gains, and other income, you would NOT be able to rollover the full $50k, since your combined AGI would amount to $101k. Would you then be able to only rollover $49k (in order to stay under the $100k limitation)??? I kinda think so. Which would void my "all or nothing" position that I took earlier.
As with anything, the devil is in the details. And the devil is beginning to rear his ugly head.

TMF Taxes
Roy
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