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The question and your answer:

[[ What happens if a person converts conventional IRAs to ROTH accounts early in the year
assumming less than 100K income and for some unexpected reason exceeds that amount come
year end?]]

In my opinion, the rollover would be considered "non-qualified", and would not be allowed as a rollover. You would then be treated as simply taking a distribution from your regular IRA. Subject to taxes and penalties.

TMF Taxes

From this I assume that you would pay the full tax and penalty on your 1998 Income Tax Return. Would you be taxed on the full value of the non-allowed rollover at the date of the electronic transfer or only on the the amount the gain? This would be a conversion from a nondeductible IRA. Let me give you an example.

I transfer $27,000 from a regular IRA to a Roth IRA. Of the $27,000, $12,000 was contributed on a non taxdeductible basis.

Would I pay the taxes and penalty on the full $27,000 or the $15,000?
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