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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Nondeductible IRA Contributions? Date: 2/23/2003 9:10 PM
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HELP!! I'm in the process of doing my taxes on TurboTax and have run across a question I'm not sure about.

In 2002, I did some conversions from funds in my Traditional IRA over to my Roth account. In doing my 2002 taxes, it asks for the cost basis of my Traditional IRA AND the amount it was worth on December 31, 2002 (the difference being a drop of about $10,000). However, this only applies if this was a "nondeductible IRA contribution". The funds in the Traditional IRA were a direct transfer from a 401k (due to divorce) and, as such, I did not take an IRA deduction for it. Therefore, I'm thinking this qualifies as a nondeductible IRA contribution. Am I right?

The difference in value means a huge difference in the amount of taxes due, so I hope it works out in my favor. But, I don't want to do anything wrong when claiming it on my taxes. What to do??

Any and all help would be appreciated.


In all likelihood, the original contributions to the 401(k) plan (which I assume were made by your ex-spouse) were deducted from gross salary/wages before income tax was determined. If so, then you have no basis and all your contributions to the IRA are considered "deductible contributions". Your cost basis is $0 and all of the converted amount is subject to income tax this year.

Sorry.

Ira
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