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Author: SnootFool Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Roth IRA Questions Date: 4/21/1998 10:57 PM
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Q. << 1. Am I going to have to pay any taxes on the $2K Roth IRA Conversion by prorating the $2K
non-deductible account with the $20K deductible account that already existed? In other words, is
90% of that conversion actually taxable, even though it was from a non-deductible account?
2. The Roth IRA account is actually identified as a Conversion account in title. Does this carry any
significance or implications that should make me think twice about adding "new money" to the account? In other words, do I need to open another regular Roth IRA to fund with "new money"? >>

A. 1. Yes. Yes. 2. Yes. Yes.

To expand a bit <g>:
1. The $10 word the IRS uses is not prorate but aggregate. You pay taxes on coversion $ as if it were being sucked proportionally from the *aggregate* of all your traditional IRAs. So, 90% is taxable (assuming your math is right [2K/22K])
2. The current answer is yes, since most IRA custodians are requiring customers not to commingle conversion & contributory Roth $ based on an IRS recommendation. (i.e., there's no law against commingling but when the IRS talks...people listen, to coin a phrase) According to KAT's awesome Tax/IRA Website (http/www.fairmark.com/ -go there NOW!), my impression is that this restriction will be lifted before year's end by the mighty Technical Corrections Bill now before Congress.
Chris S.
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