The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: Roth IRA conversion Date:  9/26/1998  11:06 AM
Author:  TMFPixy Number:  5659 of 88487

Greetings, Soccerboy, and welcome. You ask:

In 1986 my wife set up a traditional IRA with a roll over from a profit sharing plan. She was changing employers at the time. We have made several non-deductble contrbutions over the years. We want to convert to a Roth IRA but I read several months ago that there might be some tax problems since the original amount came from a profit sharing plan. Does antone know if there are any special rules for this scenario?

Obviously, the money came from a qualified retirement plan or the rollover would not have been allowed. The nondeductible annual IRA contributions to that IRA since the rollover merely preclude that money from being transferred into a future employer's qualified retirement plan. They have no impact on her ability to convert that IRA into a Roth IRA, nor will they pose a tax problem to you during the conversion. She may convert that IRA to a Roth. All previously untaxed money in that IRA must then be declared as income and taxed. In essence, that declarable income is the net of the market value on the day of the conversion less the nondeductible contributions she made since opening that IRA. The income may be declared entirely in 1998 or equally as one-fourth of the amount in 1998, 1999, 2000 and 2001.


Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us