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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: of 75335  
Subject: Re: Conversion to Roth Date: 10/8/1998 5:11 PM
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Greetings, Joe, and welcome. You asked:

I have an IRA which contains about $4,000 that was added post-tax (not deducted) as well as more that was rolled over from a 401K. Can I convert the 4K into a Roth without paying taxes on that amount since it was already taxed? Anyone done this (partial transfer into Roth)

Nice try, but it won't work that way. Distributions from a traditional IRA or IRAs composed of both deductible and non-deductible money are deemed by the IRS to always consist of partly taxable and partly non-taxable money based on the ratio of the already-taxed contributions in those IRAs to the total value of all your IRAs. In your case, say you made a $4K after-tax contribution and rolled $4K of untaxed 401k money to that or even a different IRA. The market value of the IRA (or both IRAs) is now $12K, or $6K in each. You convert $4K to a Roth IRA and take it from the non-401k money IRA. The IRS requires you to look at all your IRAs and get the market value ($12K). You must also look at all IRAs to get the total of after-tax money you put into them ($4K). Divide the total after-tax contributions ($4K) by the total value ($12K), and that tells you the percentage of the Roth conversion that is not subject to tax. The remainder will be. So in this example, of the $4K converted, $1,320 is not taxed and $2,680 will be. And as for your traditional IRAs, you still have $2,680 of after-tax contributions in them after the conversion.

Regards….Pixy
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