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Is the way you calculate your basis for IRA's correct? I put in $8000 over 4 years ($2000/yr) in a contributory IRA and claimed them as non-deductible (filled out form 8606 for each year). I converted it to a ROTH in 1998, (total amount at the time of conversion was $24,000) and at 12/31/98 it's value grew to $51,000.

On Turbotax, it is saying my basis is only something like $2599. I understand the calculation that the IRS provides for calculating the basis, but don't think its fair. I was already taxed on the $8000 in those previous years. Why isn't my basis $8000?

Also, what's the best way to calculate basis on a mutual fund. I put in $1100 over a period of 4 years (from automatic decuctions from my checking account) and I cashed out in 1998 for $1904. Do I add back the did amounts I paid for dividends I paid the previous years?

Thanks
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<<< Is the way you calculate your basis for IRA's correct? I put in $8000 over 4 years ($2000/yr) in a contributory IRA and claimed them as non-deductible (filled out form 8606 for each year). I converted it to a ROTH in 1998, (total amount at the time of conversion was $24,000) and at 12/31/98 it's value grew to $51,000.
On Turbotax, it is saying my basis is only something like $2599. I understand the calculation that the IRS provides for calculating the basis, but don't think its fair. I was already taxed on the $8000 in those previous years. Why isn't my basis $8000? >>>

If what you've given above is the whole story, then your basis is indeed $8,000. However, if you have any additional IRA money that you didn't convert to a Roth, then you did a partial conversion, and your basis is pro-rated according to the total percentage of your IRAs which you converted; i.e. some of your basis would still be associated with the part of the IRA which you didn't convert to a Roth, and so you only get to use the part that was associated with the amount undergoing conversion. If you did indeed convert all of your existing IRAs, then you are probably making a mistake in answering the TurboTax interview questions. Your listing of your converted Roth IRA account balance as of 12/31/98 leads me to believe this may be the case. Please note that if you did a total conversion to a Roth IRA, the account balance at the end of year is irrelevent. Form 8606 does ask for the account balance as of 12/31/98 of any other traditional IRAs which you have outstanding. You should not include your Roth IRA account balance in this amount. If you did, this would cause TurboTax to pro-rate your basis when it shouldn't, resulting in the reduced basis amount reported.

Wavelength
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[[Is the way you calculate your basis for IRA's correct? I put in $8000 over 4
years ($2000/yr) in a contributory IRA and claimed them as non-deductible
(filled out form 8606 for each year). I converted it to a ROTH in 1998, (total
amount at the time of conversion was $24,000) and at 12/31/98 it's value grew
to $51,000.]]

OK...

[[ On Turbotax, it is saying my basis is only something like $2599. I understand the
calculation that the IRS provides for calculating the basis, but don't think its fair.]]

I can't speak for what Turbo Tax is doing, or how it is doing it. But based upon what you tell me in the first paragraph, you basis in your TOTAL IRA is $8k. But if you are making ONLY a PARTIAL conversion of your IRA, then your basis is spread over the entire IRA, and your basis may be reduced.

[[ I was already taxed on the $8000 in those previous years. Why isn't my basis
$8000?]]

If you converted your entire IRA...it should be. Why TTax says it's not is something that I can't comment on. But if you are only making a partial conversion, then TTax could be correct.

[[ Also, what's the best way to calculate basis on a mutual fund. I put in $1100
over a period of 4 years (from automatic decuctions from my checking account)
and I cashed out in 1998 for $1904. Do I add back the did amounts I paid for
dividends I paid the previous years?]]

Basically yes. All of your reinvested dividends are added to your basis. You are basically buying additional shares at different times and different prices. So in order to compute your basis correctly, you must add them to your original basis.

We tell you exactly how to do this in TMF Investment Tax Guide. You might want to check it out.

TMF Taxes
Roy

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