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* I am 70 and will take my first RMD this year. My Traditional IRA balance on 12-31-05 was $135,000.
* I had made Deductible and Non-Deductible contributions over the years, the latter totalling $24,000. I have not made any IRA contributions in the last 2 years.
* I know how to calulate the RMD amount but would appreciate the various
entries to be made on Form 8606.


OK. You've got all the basic info here, except for one thing. You need to polish up your crystal ball and know what the balance in your IRA will be at 12/31/06, after taking the distribution. Since mine is in the shop (durn thing keeps leaking magic fluid all over my desk), I'll just say that balance is $140k. And we already know that your RMD is about $5k, since it's based on the value of your IRA at the beginning of the year.

The tricky thing is to take your year-end IRA balance of $140k and add back in the distributions. That gives us $145k. Your non-deductible contributions are 24k/145k or 17% of this total. So the non-taxable portion of your $5k distribution is about $850. You'll pay tax on $4,150 of the distribution. After taking this distribution, your remaining non-deductible contributions will be $24,000 - $850 or $23,150.

That's really all there is to it. The $23,150 figure is the number that carries over into the following year as the remaining basis in your IRA.

As to the line numbers, here's the answer in the back of the book. This is on the 2005 form, so there's no guarantee the line numbers will be correct for the 2006 form. Specifically, I'm guessing the hurricane related lines will go away for 2006 (unless it's another bad hurricane season this year and Congress passes some similar tax relief bill). And I've rounded things a bit, so you'll want to do the calculations with a little more accuracy.

1. 0
2. 24000
3. 24000
4. 0
5. 24000
6. 140000
7. 5000
8. 0
9. 145000
10. 17%
11. 0
12. 850
13. 850
14. 23150
15a. 4150
15b. 0
15c. 4150

--Peter
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