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I have a mutual fund with Smith Barney and I wanted to convert some of it to a Roth IRA as I do not have any IRA at the moment. I asked my broker to do this and still keep it with the same mutual fund. She said "That she could'nt do this with out selling the funds first, and that I can only have an IRA or Roth IRA by paying cash". I thought that this seemed strange, to sell a fund and turn around and buy it back. The question I have: is this right? or is the broker saying this to make a few bucks.
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BranCollingwood:
I have a mutual fund with Smith Barney and I wanted to convert some of it to a Roth IRA as I do not have any IRA at the moment. I asked my broker to do this and still keep it with the same mutual fund. She said "That she could'nt do this with out selling the funds first, and that I can only have an IRA or Roth IRA by paying cash".

I can't say whether Smith Barney has some internal rule which requires what your broker is suggesting. However, out here in the rest of the world, it is perfectly normal to convert an IRA to a Roth without liquidating all one's shares to cash. Note: I'm not a mutual fund investor (thanks TMF!) & there may be something I'm missing, but I think the answer is your broker is AFU.

Chris
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BranCollingwood:
I have a mutual fund with Smith Barney and I wanted to convert some of it to a Roth IRA as I do not have any IRA at the moment. I asked my broker to do this and still keep it with the same mutual fund. She said "That she could'nt do this with out selling the funds first, and that I can only have an IRA or Roth IRA by paying cash".

SnootFool:
I can't say whether Smith Barney has some internal rule which requires what your broker is suggesting. However, out here in the rest of the world, it is perfectly normal to convert an IRA to a Roth without liquidating all one's shares to cash. Note: I'm not a mutual fund investor (thanks TMF!) & there may be something I'm missing, but I think the answer is your broker is AFU.

I think what you are missing is that Brian said he does not have any IRA at the moment. He is not converting a regular IRA to a Roth IRA. He is wanting to move funds from a normal taxable account into a Roth account.

Chris, the answer to your question is that what the Smith Barney broker said is correct. All contributions to IRAs must be cash contributions. Before you can move any of the money from your taxable account to your IRA, you must sell the funds to get cash, pay tax on whatever gains that result from the sale, and contribute cash into your IRA.

In addition, since you are not converting from a regular IRA to a Roth IRA, you can contribute at most $2000 a year. Less if your AGI is too high.

- Ted

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From my experience you can:
Transfer a Traditional IRA to a ROTH with out selling the Stocks or Mutual funds........I did it...no problem.
But as for open a new ROTH (non-transferring from a traditional, which I think the question is). You must make your deposits in cash only. That is the LAW. I have to with my Contributory ROTH.....only cash deposits.
hope this helps.
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