Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Roth Conversion Question
Old 12-07-2008, 05:05 PM   #1
Dryer sheet aficionado
 
Join Date: May 2007
Posts: 31
Roth Conversion Question

Simple IRA conversion question that I can't find the answer to...

I contribute $100 into a traditional non deductible IRA and buy a stock. Over the years the stock price stays exactly the same but I reinvest $10 into the account through dividend reinvestment. Come 2010 and I want to convert this to a Roth IRA...what is my cost basis ($100 or $110)? Thanks.
__________________

__________________
DoubleDown is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-07-2008, 06:56 PM   #2
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,761
Quote:
Originally Posted by DoubleDown View Post
Simple IRA conversion question that I can't find the answer to...

I contribute $100 into a traditional non deductible IRA and buy a stock. Over the years the stock price stays exactly the same but I reinvest $10 into the account through dividend reinvestment. Come 2010 and I want to convert this to a Roth IRA...what is my cost basis ($100 or $110)? Thanks.
See your form 8606 for the basis. Assuming you have been filing that with your taxes over the years.

Rita
__________________

__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 12-07-2008, 07:46 PM   #3
Recycles dryer sheets
thefinancebuff's Avatar
 
Join Date: Dec 2008
Posts: 262
Quote:
Originally Posted by DoubleDown View Post
Simple IRA conversion question that I can't find the answer to...

I contribute $100 into a traditional non deductible IRA and buy a stock. Over the years the stock price stays exactly the same but I reinvest $10 into the account through dividend reinvestment. Come 2010 and I want to convert this to a Roth IRA...what is my cost basis ($100 or $110)? Thanks.
Still $100, assuming that's the only traditional IRA you have. If you have other traditional IRAs then the cost basis has to be prorated. Say you have another IRA with $1,000 in it but no basis (money came 401k rollover). You are converting 110 / (1000 + 110) = 9.91%. The cost basis for this conversion is $100 * 9.91% = $9.91.
__________________
thefinancebuff is offline   Reply With Quote
Old 12-07-2008, 07:47 PM   #4
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by DoubleDown View Post
Simple IRA conversion question that I can't find the answer to...
I contribute $100 into a traditional non deductible IRA and buy a stock. Over the years the stock price stays exactly the same but I reinvest $10 into the account through dividend reinvestment. Come 2010 and I want to convert this to a Roth IRA...what is my cost basis ($100 or $110)? Thanks.
$100. Ideally you filed the Form 8606 with this number on it when you did your taxes that year.

You've already paid taxes on the $100, but you haven't paid taxes on the $10 of dividends.

Quote:
Originally Posted by Gotadimple View Post
See your form 8606 for the basis. Assuming you have been filing that with your taxes over the years.
I was advised once by a CPA about a Roth conversion: "Stop asking complicated questions for a few minutes and just plug through the Form 8606. Then you'll understand what they're asking you to do."
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Thank you...
Old 12-08-2008, 10:15 AM   #5
Dryer sheet aficionado
 
Join Date: May 2007
Posts: 31
Thank you...

Thank you all for your help. It makes sense now. BTW, Nords that quote pretty much hits the nail on the head...mahalo.

DD
__________________
DoubleDown is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
IRA to Roth Conversion - another question megacorp-firee FIRE and Money 7 05-09-2008 09:28 AM
Roth conversion question Three-D FIRE and Money 1 03-15-2008 09:24 PM
IRA to Roth Conversion - related question on taking SS later megacorp-firee FIRE and Money 15 05-25-2007 07:43 PM
Traditional IRA to Roth Conversion Question Dog FIRE and Money 5 03-10-2007 10:53 PM
Roth conversion question REWahoo FIRE and Money 14 10-07-2006 08:48 AM

 

 
All times are GMT -6. The time now is 07:53 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.