Roth Conversion Question

[DoubleDown]

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.

 

[Gotadimple]

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

 

[thefinancebuff]

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.

 

[Nords]

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.

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."

 

[DoubleDown]

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