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Any issues with the above plan?

You haven't said one way or the other, so I will ask: Do either of you have any Traditional IRAs with pre-tax money, including rollover IRAs? If so, you cannot convert just the non-deductible contributions for 2009/2010. The conversion will be considered to be pro-rated across that individuals entire Traditional IRA portfolio.

For example, if your wife has a $40k Traditional IRA from the rollover of a previous pre-tax 401(k), and you contribute $10k for 2009 & 2010 to a non-deductible IRA for her, her total Traditional IRA portfolio is 80% pre-tax ($40k) and 20% after-tax ($10k). You will be taxed on 80% of any conversion that is made for her accounts.

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