Message Font: Serif | Sans-Serif
No. of Recommendations: 0
[[The following information, found in the article by Roy Lewis, "The New Roth IRA - Part II"
appears to be wrong:]]

Oh really? Let's take a closer look...

<< 2. The special tax break (in 1998) is that the income that must be reported based on the IRA
rollover MUST be spread evenly over a four-year period. Note that it is the INCOME that must
be spread over the four tax year
period… and NOT the tax itself. Please also note that this spread of income MUST take place…
it is NOT an election. >>

Wow...I don't know where you found this. This is an OLD post...originally written back in January of 1998. It should have been pulled in August, 1998 when the clarification rules (via the most recent Tax Act) took effect.

As you point out, this is NOT correct. In my current re-writing of the Roth IRA in the Taxes FAQ area, this paragraph reads as follows (Roth IRA Redux, Part II):

<<Roth conversion income spread: The law says that if your Roth IRA conversion takes place BEFORE January 1, 1999, the amount required to be included in income as a result of the conversion MAY be included in gross income ratably over the four tax-year period beginning with tax year 1998. Or, on the other hand, you may elect to take the conversion income all in 1998. The choice is yours. But remember that this "spread out" option only applies to conversions made on or before December 31, 1998. If you decide to make a Roth IRA conversion in 1999 or later, you are free to do so. But you'll be required to report the conversion income in the year of conversion…in total. You'll lose the potential tax saving benefit of the "spread out" of the income.

This income (spread out or not) WILL impact any and all tax issues that are based upon AGI…except for any current or future Roth contribution and/or conversion issues. But your medical expenses (7.5% AGI floor), miscellaneous deductions (2% AGI floor), taxability of social security (based upon AGI), passive loss limitations (based upon AGI) and many other tax provisions that use AGI as a guidepost will be impacted. And, in some cases, severely impacted. So this must all be taken into consideration when you decide if you want to "spread" your income or not, or even if you want to make a Roth IRA conversion at all.>>

So, as you can see, the new law (and my new write up) points out the fact that you MAY elect to spread the income OR take the income all in 1998 (for 1998 conversions). This 4 year spread option is not available for conversions that take place in 1999 or later...where all of the income must be reported in the year of conversion.

[[ I plan to convert my IRA's to Roths in 1998 but want to apply all the resulting income to my 1998
income for tax purposes. The IRS and at least one fund company told me that I can do this. Any

My only comment is to try and find out WHERE you read this information. If it is out there, currently, somewhere in Fooldom, I would LOVE to know where it is so I can get it pulled.

Remember that many other Fools "cut and paste" many of my weekly articles. I have no control over where they might go or what links they may be using. And, in virtually all cases, I don't even know they are being used. So it is simply impossible for me to track down these "old" references and make the required corrections.

So, again, if you can remember where you read this, it'd be appreciated...and I'll get it pulled so that this confusion doesn't happen again.

And thanks for stoppin' by and asking for a clarification.

TMF Taxes
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.