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DrBear asked:
<<Question #2: I'm pretty sure I could do what I want to do if I took my IRA-Rollover and (groan) rolled it into my current employer's 401k. True? Follow-up question: What if I did this in 1999 or later? (I might, if I knew I'd be leaving my current employer). Could I file amended returns for 1998 to pay less tax?>>

Pixy Replied:
Put IRA#1 into a new employer's 401k prior to the Roth rollover, and your problem is solved. Only IRA#2 will be taxed on the conversion.

My question:
Does IRA #1 have to be rolled into the new employers
401(k) when IRA #2 is converted to a ROTH or at the
end of the tax year (Dec 31, 1998) in order to get the more
favourable tax treatment?

I can not find direct IRS information on this point,
but the 1997 form 8606 calculates the taxable portion
of a withdrawal from a (partially) non-deductable IRA as:

withdrawal * ( 1 - basis/(value_at_end_of_year+withdrawal))

This suggests that the money must be in the 401(k) at the
end of the year. Cynic that I am, I suspect that Congress and
the IRS will not decide this till January 1999 when its
too late to do anything.
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