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Author: DarkOut Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75381  
Subject: Conversion to Roth IRA question... Date: 12/4/1998 12:35 PM
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I'm 35 and considering converting a rollover IRA I have (about $4300) to a Roth. I've been looking at the conversion criteria and from what I see I'm only eligable to convert if I file my taxes as married filing seperately. Can anyone confirm/clear this up for me? Here's the details:

I'm married but getting divorced next year. At the time I file my taxes I'll not have lived with my wife for the last year+. I make about $72K a year (joint income is $130K) a year. According to the rules I've read (what a messs!) the income limit on conversion if married is the same as if single, so I can't qualify. There seems to be a caveat that if you're married filing seperately and have not cohabitated for more than a year, then the single income limits apply (which I do meet). Have I misread the rules?

--DarkOut
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7030 of 75381
Subject: Re: Conversion to Roth IRA question... Date: 12/5/1998 11:01 AM
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Greetings, Darkout, and welcome. You asked:

<<I'm married but getting divorced next year. At the time I file my taxes I'll not have lived with my wife for the last year+. I make about $72K a year (joint income is $130K) a year. According to the rules I've read (what a messs!) the income limit on conversion if married is the same as if single, so I can't qualify. There seems to be a caveat that if you're married filing seperately and have not cohabitated for more than a year, then the single income limits apply (which I do meet). Have I misread the rules?>>

That's true, BUT … (Ain't there always one of those?) The living apart rule doesn't mean it was for a period of one calendar year or more, it means for the entire tax-year, which for most folks runs from Jan 1 through Dec 31. Why the distinction? Well, let's say you moved out of the house on Jan 2, 1998. On Jan 3, 1999, you convert a traditional IRA to a Roth for tax-year 1998 because you have lived apart from your wife for over a year. Your AGI for 1998 is $50K. Is the conversion valid? No, because you lived with your wife for one day during the 1998 tax-year. However, the conversion would be valid for tax-year 1999 (assuming you didn't move back in with your spouse).

Regards….Pixy


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Author: DarkOut Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7043 of 75381
Subject: Re: Conversion to Roth IRA question... Date: 12/5/1998 3:03 PM
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TMFPixy said:
The living apart rule doesn't mean it was for a period of one calendar year or more, it means for the entire tax-year,

That's OK, I fall into that category, too. Thanks alot for the confirmation. The only remaining question: is it worth the hassle to file a return as married filing seperately to get the tax burden spread out over four years, or should I just wait until next year and bite the bullet all at once. The IRA in question would only be about $6000 at the end of 1999. I'm not sure where that puts me in terms of tax brackets. Looks like I've got some more digging to do.

Thanks for the info.

--DarkOut

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