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Hence, every dollar converted to a Roth IRA will be counted as taxable income. Gains are fully taxed when converted to the Roth. Gains in your 401K are not taxed when converted to an IRA, but they are when the IRA is converted to a Roth.

There are no gains or losses in traditional tax-deferred 401(k) and IRA accounts. They are just pools of value. You can transfer value between tax-deferred accounts without creating a tax event. A transfer to a taxable or tax-exempt account treated as a withdrawal from the tax-deferred account and is a taxable event. The value withdrawn is taxed as ordinary income.
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