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Matthew writes:

<<Hi Pixy - have a question for you. In the case of a Roth R/O IRA set up in 1998; I've made two of the four yearly tax payments and will be paying the third in April. It was a R/O from a conventional pension fund R/O IRA. I am over 71 yrs. young; can I withdraw any of the transferred assets from the Roth without penalty, before the 5 yr. holding period is up?>>

Yes, you can; however, in doing so you will speed up the reporting of income from the conversion. Say you converted $1,000 in 1998 to be spread over 1998, 1999, 2000, and 2001 at $250 per year. You reported that $250 for each of the years 1998 and 1999. This year you want to take $100. When you take it, you must report the original $250 conversion income for 2000 plus $100 from that still due in 2001, or a total of $350. In 2001, then, you would just report the remaining $150 of conversion income. Note that you will not be penalized, but you will be taxed sooner on the distribution.

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