Advanced Underwriting Consultants

Question of the Day – December 16

Ask the Experts!

Here’s the question of the day.

Question: I have a client who wants to do a Roth conversion with his traditional IRA.  The client will start the conversion in the current calendar year, but will finish it (by 60 day rollover) in the next one.  In which year will the income tax result occur?

Answer: The tax result for a Roth conversion will occur in the year the distribution from the traditional IRA takes place.

Say Fred takes distribution from his traditional IRA on December 15, 2011.  He rolls over the money—converting it—to a Roth IRA on February 1, 2012.  The income tax result associated with the conversion is a calendar year 2011 event—even though Fred could have theoretically rolled over the distribution to another traditional IRA and avoided taxation in 2012.

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