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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Roth IRA Basis Date: 2/16/2000 7:37 AM
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<< In preparing my taxes, I think I may have miscalculated some items on my 8606 for 1998. In 1995 I rolled a 401(k) balance into a traditional IRA account. In 1997 , I made a contribution with post tax dollars. I converted to a Roth and made a contribution in 1998. >>

Let's stop here for a moment. The 1997 contribution is basis. If the 1998 contribution was to the traditional IRA, before the conversion, it is also basis. If it was contributed to the Roth, it is not.

<< Where I am getting confused on the 8606 form is Line 15 where it asks for the basis of the Conversion amount.

I understand that I owe taxes on the total FMV of the Roth IRA less the non-deductible amounts. (ie - total minus the post-tax yearly contribution I made in 1997) Is this number then my basis? I was figuring it more like a stock, by looking at the original value of funds contributed. Clearly, I am confused. >>

Your basis, as I described it above, is what should have gone on line 15. If you did it wrong, you need to amend your 1998 return on Form 1040X, attaching a revised 8606. If you're doing a 4-year spread of the conversion income, be sure to use the correct figure on your 1999, even if you haven't yet had a response from the amended return.

Phil Marti
Tax Preparer
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