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Author: DonRPI Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Subsequent year conversions & withdrawal time Date: 12/11/1998 8:40 PM
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Assume that total taxes make ROTH conversion income painful this year, but taxes for the next three can be managed easily.

If I convert even a small amount this year, the four year account is open. Now when I convert an appropriate amount (for my actual tax situation) each of the next three years, I pay tax for all I convert that year.

Then when the "five year holding period", based on the initial conversion is up, I believe I have access to ALL the converted funds and earnings from all four conversion years.

Is this correct?
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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: 7127 of 121061
Subject: Re: Subsequent year conversions & withdrawal tim Date: 12/14/1998 1:11 PM
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[[Assume that total taxes make ROTH conversion income painful this year, but taxes for the next
three can be managed easily.]]

OK...I'm not quite sure what you mean exactly, but I'll assume that you mean that your income is "up" this year, but will be "down" (comparatively) over the next three years.

[[ If I convert even a small amount this year, the four year account is open. Now when I convert an
appropriate amount (for my actual tax situation) each of the next three years, I pay tax for all I
convert that year.]]

Not necessarily. You can elect to take your 1998 conversion income all in 1998 OR you can spread it out. But with respect to 1999 (and later) conversions, you are correct in that the conversion income must be reported in the year of conversion. There is no income spread for conversions made in 1999 or later.

[[ Then when the "five year holding period", based on the initial conversion is up, I believe I have
access to ALL the converted funds and earnings from all four conversion years.]]

Yup...the five tax years run based upon your first contribution (or conversion). You no longer have separate five year holding periods for each separate conversion (or contribution).

I discuss this in much greater detail in my series on the Roth IRA in the Taxes FAQ area. Check it out.

TMF Taxes
Roy

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