The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Roth IRA Distribution of a Conversion Date:  9/30/2000  11:45 AM
Author:  tennislau Number:  40451 of 131251

I read the Roth IRA articles I - VI and I'm confused on the treatment of the distribution of a conversion with respect to the 10% penalty.

Say I contributed $ 2000 to my Roth IRA in year 1998. In year 2000 I converted $50,000 to my Roth IRA from a Traditional IRA and paid the appropriate taxes on the Traditional IRA distribution.

In year 2003 I'm age 63 and decide to distribute $52,000 from my Roth IRA. I understand that the first $2000 distributed is my contribution and will not be subject to tax or a 10% penalty.

Will the $50,000 conversion distibution be subject to the 10% penalty?

Roth IRA Article III seems to say that I meet the five year rule and will not incure the 10% penalty.

Roth IRA Article IV seems to say that I must look at the year of the conversion, in which case, I would not meet the 5 year rule and thus incur the 10% penalty.

Please help me understand these conversion rules.

Thanks, tennislau

Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us