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Greetings, Don, and welcome. I don't recall seeing a post from you before. You asked:

<<I am leaning toward withdrawing my mother's IRA ($5000.00 CD)and converting to a Roth.Something very safe.She is receiving Social Security at $14000.00/yr.Averaging the tax burden over 4 yrs., it would be $12500.00/yr.Is this added to Social Security for a gross income of $26500.00/yr for the next 4 years? The CD matures Jan. '99and something has to be done. My mother is 85yrs.>>

Based on the rules for Mandatory Required Distributions, you mother should have been taking taxable distributions from her IRA since age 70 1/2. Does she have other tax-deferred retirement accounts from which she has been withdrawing? If not she is liable for a very substantial tax penalty. Therefore, some portion of that 50K IRA maturing CD has to be paid out as a taxable distribution and possible tax penalty.

TMF Pixy - what is your read on this?

My read is that it's a great catch on your part. I let the age factor slip right by me looking at the conversion issue. I hope she has been receiving required minimum distributions. Assuming she has, she will still be required to take one in the year of conversion, but can convert any remaining funds after it's taken. If she hasn't, then there will be an imposition of a 50% penalty on everything not taken when required. I'm not a tax expert, but knowing the IRS there could even be interest penalties assessable on the penalty due in each of the prior years. Those alone could go far in wiping out the entire IRA. If that's the case, then it's time to call in the tax goo-roos.


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