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Subject:  Re: ROTH IRA & tax liability Date:  4/6/2005  5:07 PM
Author:  JAFO31 Number:  78342 of 128039

LoveFinances: "How much of a tax benefit is it to contribute to a ROTH IRA?"

Zero for current year income tax liability.

"Can it have significant impact on reducing tax liability?"

Not for current year income tax liability; alot if you do well, make only qualified withdrawals the current income tax rules do not change significantly.

"And can this still be done even if we've already filed? (I've left a message with our tax preparer to ask the same thing.)"

I believe so, until 4/15 (generally speaking); I do not recall whether an amended reurn will be required. I think not for a Roth but yes for a traditional.

"Also, if DW and I both fully fund our (currently non-existent) ROTHs for 2004, do you think it's best to make the $6k contribution using funds in our brokerage account (value: $16k) or by selling some ESPP stock (value: $20k). The ESPP stock has made nearly a 500% profit already, so there would be more significant 2005 tax implications in that scenario.

Bottom line is we don't have the cash on hand, so it would require selling securities to make the contribution."

I would want to minimize current taxes and preerve funds for future growth. I would not do it blindly.

"Is this a good idea or not?? Should we not worry about rushing to do it this year and just make it a goal to make contributions for 2005?"

Not enough information for me to feel comfortable responding.

Regards, JAFO

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