Randall Posted April 7, 2012 Report Share Posted April 7, 2012 If client takes out a distribution in 2011 from a 2010 conversion, is all of the conversion taxable in 2011? Round number example, $120k converted in 2010, client elected two year deferal, 60k each year to be reportable in 2011 & 2012. Client takes out 70k in 2011? Pub 590 seems to indicate only 70k taxable in 2011 and balance 50k taxable in 2012. A PPC pub says all 120k is accelerated into 2011. They reference IRC 408A(d)(3)(E) which seems ambiguous to me. Walking thru 8606 Part III also comes up with the whole amount 120k taxable in 2011. Any help or clarification? Quote Link to comment Share on other sites More sharing options...
Yardley CPA Posted April 7, 2012 Report Share Posted April 7, 2012 If they converted from an IRA to a Roth in 2010 and deferred the tax to 2011 and 2012, it would seem the distribution from the Roth in 2011 should not be a taxable event. Isn't that the reason for converting it in the first place? Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 7, 2012 Report Share Posted April 7, 2012 But a distribution before 2012 does speed up the reporting of the conversion. In this case, the 2012 reporting gets moved to 2011 due to the 2011 withdrawal. (If he'd taken out only $20,000, you'd be adding $20,000 to the $60,000 due to be reported in 2011. But this client took out more than was due to be deferred to 2012, moving all reporting to 2011.) Quote Link to comment Share on other sites More sharing options...
Randall Posted April 8, 2012 Author Report Share Posted April 8, 2012 This is what I'm finding too. Doesn't seem fair, but you reduce the 2012 reportable amount first. Ugh. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.