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[[ Using last year's tax forms, however, it looks like only the year-end IRA balances are used to
compute basis on withdrawals. I think that means that the tax-free part of the conversion would be
only $200, not the $2000 I had intended it to be. (And the remaining $1800 of basis would stay in
the rollover IRA.)]]

Right...there's the problem.

Not really a problem... it's just extra paperwork to hang onto, since I still have an $1800 basis attached to the rollover IRA. For tax purposes, I can think of this as converting the original $8000 deductible IRA, $200 of the non-deductible IRA and $1800 of the rollover IRA.

Which brings up another issue. I do not plan to ever move the rollover IRA back into another 401k plan, but if I change my mind on this, would I lose that $1800 tax basis that I have in the account?
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