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Author: AKFOOL1 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 122469  
Subject: Roth conversion Date: 9/20/1998 12:07 AM
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I have converted my traditional IRA for amount of 15,500 to Roth IRA last March. If it's worth 14,500 by end of 1998, what amount shall I report to IRA as ordinary income on my 1998 income tax return? Thanks in advance for your help.
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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5400 of 122469
Subject: Re: Roth conversion Date: 9/20/1998 12:27 AM
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AKFOOL1 writes:

I have converted my traditional IRA for amount of 15,500 to Roth IRA last March. If it's worth 14,500 by end of 1998, what amount shall I report to IRA as ordinary income on my 1998 income tax return? Thanks in advance for your help.

I reply:

Your income is the size of the IRA at the time of the last conversion. The July tax bill passed by Congress approved the procedure of "unconverting" a Roth IRA for any reason. Therefore, as has been discussed many times on this board, a winning strategy is to unconvert and then reconvert (before the end of the year), and pay taxes only on the amount your IRA is worth at the time of the new conversion.

Query for TMFTaxes, though: What happens if you've added 1998 contributions after the conversion? --Bob

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Author: AKFOOL1 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5401 of 122469
Subject: Re: Roth conversion Date: 9/20/1998 11:54 AM
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Your income is the size of the IRA at the time of the last conversion.
The July tax bill passed by Congress approved the procedure of
"unconverting" a Roth IRA for any reason. Therefore, as has been
discussed many times on this board, a winning strategy is to unconvert
and then reconvert (before the end of the year), and pay taxes only on
the amount your IRA is worth at the time of the new conversion.>>>

Thank you Bob for your reply. I didn't know that one can unconvert and reconver, it will be great to save me a few dollars on income tax. I am new on this board.

<<<Query for TMFTaxes, though: What happens if you've added 1998
contributions after the conversion?>>>

Now, could you please so kindly guide me thru where I can find the info. or show me the procedure for hoy to unconver and reconver - my money is in Fidelity mutural fund. Thanks,
























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Author: DarrellK One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5405 of 122469
Subject: Re: Roth conversion Date: 9/20/1998 9:40 PM
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AKFOOL1 writes,
Now, could you please so kindly guide me thru where I can find the info. or show me the procedure for hoy to unconver and reconver - my money is in Fidelity mutural fund.

This is a good source of information:

http://www.fairmark.com/rothira/recon.htm

- Darrell

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Author: AKFOOL1 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5406 of 122469
Subject: Re: Roth conversion Date: 9/20/1998 10:11 PM
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This is a good source of information:
http://www.fairmark.com/rothira/recon.htm<<<

Dear Darrell,

Thanks for the info. I called Fedility today and I will have to write them a letter to unconver it. It sure will save me some tax money.


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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5422 of 122469
Subject: Re: Roth conversion Date: 9/22/1998 12:22 AM
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[[I have converted my traditional IRA for amount of 15,500 to Roth IRA last March. If it's worth
14,500 by end of 1998, what amount shall I report to IRA as ordinary income on my 1998 income
tax return?]]

Looks like you got all of your questions answered on this point without my even showing up.

DarrellK even gave you the URS for the fairmark.com web site. Pretty slick, eh?

Anyway, we have a Taxes FAQ area here at the Fool. You might want to check it out for some information on various tax issues.

TMF Taxes
Roy

SPECIAL NOTE: Remember that this response is not the "last word" on your situation. It is really only a starting point. Make sure to review the "Read This First" post
(http://www.fool.com/School/Taxes/TaxesDisclaimer.htm) for additional information. In addition, many of your questions may already be referenced in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's Money area (http://www.fool.com/money.htm) and check out "Tax FAQs" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov).

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5424 of 122469
Subject: Re: Roth conversion Date: 9/22/1998 12:32 AM
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[[Query for TMFTaxes, though: What happens if you've added 1998 contributions after the
conversion?]]

It appears, based upon the proposed regulations, that you (or the Roth IRA trustee) would have to make a computation isolating the conversion AND the associated earnings from the original conversion up to and including the date of the recharacterization.

In short, the earnings from the conversion would have to be computed separately from any subsequent contributions.

This is going to be a nightmare for Roth IRA trustees. Which is one of the reasons (IMHO) they are dragging their feet on the re-conversion issue AND the separate account for conversion/contribution issues.

TMF Taxes
Roy

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