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I'd like to transfer IRA funds to a Roth. I'm told I must take a distribution from the IRA and then deposit the funds into the Roth. Please let me know if what I assume is correct.

No, you don't have to literally take a distribution. Congress was clear when they passed this law, saying that you can convert a regular IRA to a Roth IRA. They haven't explained exactly what is meant by that, but it's reasonably clear that if you're staying with the same broker you don't have to take a formal distribution. But the transaction has to be treated like a withdrawal and a contribution.

Here's what I imagine happening. You fill out a form requesting a full withdrawal of your regular IRA account, and another form contributing the full amount to the new Roth IRA. The broker assigns a new account number to your IRA (without cashing out the investments) and it's now listed as a Roth IRA. On your tax return you'll report it the same as if you actually withdrew everything in the account and subsequently contributed it to a Roth IRA.

KAT in Chicagoland
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