Roth Conversion of Bonds

Cat-tirement

Recycles dryer sheets
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Mar 30, 2013
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I am looking for confirmation of what I think is true...

I have an IRA that contains mostly various corporate bonds and treasuries. In the past I have done Roth conversions of stocks or funds in-kind, and I understand the advantage of doing so when the share price is lower so the taxable amount of the conversion is lower. Now I am planning on doing a Roth conversion on a bond issue that I bought below par, and is still valued below par. I assume that this below par value is what would be reported as taxable, providing an advantage over converting something with a lesser or no discount in value (sort of like when converting a stock or fund). Am I correct in my assumption? Is there anything else I'm missing or should be aware of?

Thanks for the feedback.
 
For in-kind conversions, it is the FMV on the day the asset is converted. How that is done for a specific bond issue I really don't know.
 
Obviously, you pay less taxes for converting a smaller amount, i.e. when your portfolio is down in your IRA. It does not matter whether it is bonds or equities. Conversion value is the day FMV of the day of the holdings, it does not matter if it has gains or losses.
 
It is also my understanding that the taxable amount would be the FMV of the bond on the date of conversion.
 
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