My understandingof the taxes on converting the traditional IRA into a Roth IRA is thatone pays taxes on the increase in value of the investment, not what theperson contributed, so it seems to me it would make a difference whether one opens and deductible traditional IRA and then converts it to a Roth or opens a Roth to begin with. Say Icontribute $2K to a tradional IRA this year and take the tax break nextApril for this (putting about $560 in my pocket, while still having $2Kin my IRA, saying it neither increases nor decreases in value). Then,say in May, I convert it to a Roth IRA...my understanding is that ifthere has been no dividends paid or capital gains made in theinvestment, you owe the IRS nothing for doing this, and if there is anincrease in value, you owe taxes only on this increase, not the original$2K invested. Perhaps I am understanding something incorrectly? Has anyone ever heard that a minor can make an IRA (not education IRA, buta Roth IRA or traditional IRA) contribution of up to $2K of their earnedincome (income earned outside of the home)? I read this is a Dec. 1997magazine and again yesterday in a Neuberger IRA packet, but when I asked a broker at a seminar a couple weeks ago, he pointedout that the kid would need a W2 to prove his income (which one doesn'tget by running a lemonade stand and doing chores for neighbors) and thatin MD, it is illegal for a child to sign a legal document, so theylegally can't open an IRA, and both points seemed to make sense to me. Plus, I had never heard of anyone under 18 being able to contribute toan IRA prior to this Dec. magazine, so I wondered if it might have beena new change made at the same time as the Roth and Education IRA werepassed. All for now. Thanks again so much for your help! Cordially, Respectable
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