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  • Steve Paredes January 31, 2011, 1:14 pm

    Question for the reader’s of this excelent blog. Given the unique opportunity re Roth IRA conversion in 2010 for upper income infividuals. What is the proper income tax treatment for a 2010 Traditional IRA contribution that is converted into Roth IRA later during the same year. The 2010 Premiere Turbo tax software seems indicate that 2010 Traditional IRA contributions converted to a Roth in 2010 are considered as “recharacterized.” TurboTax seems to treat recharacterizations the same as direct contributions to a Roth. Unfortunately, the income limitation still applies to contributions, thus making re-characterizations of 2010 traditional IRA contributions to Roth to be deemed “excess contributions.” Is this correct? Does anyone have insight into this matter?

  • JOE January 31, 2011, 9:09 pm

    No, it should look like a deposit and a conversion. There are a number of reasons for this, one of which is you need to include all your IRA funds when figuring how much tax to pay upon converting.

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