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Subject:  Re: Spreading a Roth Convertion over 4 years Date:  3/11/1999  11:18 PM
Author:  TMFTaxes Number:  12011 of 127987

[[ converted my IRA to a Roth IRA last year. I now have an option to pay taxes
on the entire amount on my 1998 taxes or spread it over four tax years.]]

But remember that you must spread the income...not the tax. This is a very big difference.

[[ When spreading the amount out over four years, does 1/4 of the total have to be
applied to each tax year, or can I apply 1/2 this year and the remainder over the
next three years?]]

You are required to spread out 1/4 of the income over the 4 year period. You can't vary from that formula.

[[ In case you are wondering why anyone would want to do this, I want to avoid
being kicked into a higher tax bracket in 1998, yet I need to make my 1998
adjusted gross income as high as possible for the purposes of qualifying for a
higher mortgage amount.]]

Why would somebody do what? Take the income in one year? It is possible that the IRA conversion income is small, and/or that your taxable income will greatly increase over the next three years.

Not many people decide to take the income all in one year, but there ARE times where it makes sense.

You can read more about the income spread issue in my posts on the Roth IRA in the Taxes FAQ area. You might want to check it out.

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