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Subject:  Re: LT Gains in re: Roth Conversion Date:  7/13/1999  6:29 PM
Author:  BobCPA Number:  17259 of 127987

kplynch writes:

...In 98 I converted a ~$20K IRA to a Roth IRA. All my contributions to the IRA were tax-deferred. I elected to take the ~$20K hit over four years, and basically added ~$5K to my income for '98.

My salary puts me in the 28% bracket. After reading here about the 20% rate for long-term capital gains, I got to wondering whether I over-taxed myself with the Roth conversion.

That is, almost all of the ~$20K IRA I converted was comprised of contributions I had made years ago.

- Shouldn't therefore most of the gain be taxed at the LT cap gains rate?

No. In most cases distributions from Traditional IRA's are taxed as ordinary income when made with deductible contributions.

- If so, can I rectify this with an amended return?

No need to based on above.

- In the next 3 years, in addition to the 1040 long form, what extra form(s) should I be using to calculate LT gains?...

No need calculate the L/T gains as indicated above. But more than likely the IRS will require the continued use of form 8606 Part II to report the remianing part of the conversion amount. Just like you did in 1998. Right? :)

Hope this helps.

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