I have a hypothetical question about conversion to Roth IRAs. Say I have an tax-deferred IRA with $90,000 (from a 401(k) rollover, for example), that I do not plan to convert to a Roth IRA. I also have a separate non-deductible IRA with $10,000 (no earnings, for simplicity) that I am converting to a Roth IRA. When I do the conversion, do I pay taxes only on the earnings in the non-deductible IRA (zero, in this case)? Or does the IRS consider all IRA funds to be part of a mixed, single IRA, in which case I would have to pay taxes on 10% (the percentage of converted funds, i.e. 10k/100k) of ALL my previously untaxed funds. In the latter case, I would still have to pay taxes (~$9,000), even though I had no earnings in the converted account. Is this the way the conversion would work for these accounts? I can find no definitive answer to this question.
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