A:

I converted a Traditional IRA to a Roth. The conversion was a stock equity with a cost basis of $19,000 in the Traditional IRA. The day of conversion, the value was $34,000. Which amount should the brokerage house use for the 1099-R?



Assets in IRAs do not carry a cost basis for tax purposes. Therefore, distributions and Roth conversions are taxed at the value of the assets based on their value at the close of business on the day the transaction is processed. In your example, the 1099-R should show an amount of $34,000.(To learn more about Roth IRA conversions, check out , and Roth IRAs Tutorial.)



This question was answered by Denise Appleby(Contact Denise)



RELATED FAQS
  1. Can you make regular monthly contributions to a backdoor Roth IRA?

  2. Can I deposit a taxed distribution from my traditional IRA into my Roth IRA?

    I open a Roth IRA at age 70 1/2. I get a taxed distribution from my traditional IRA, but I don't need all that money. Can ... Read Answer >>
  3. Can I convert my traditional IRA back to Roth by backdoor?

    I contributed $5,500 to Roth in 2015, but later converted to Traditional since MAGI exceeded limit. When ... Read Answer >>
  4. Can I rollover a SIMPLE IRA to a Roth IRA tax free?

    I am currently employed and my SIMPLE IRA has been in place for about 15 years. Can it be  Read Answer >>
  5. Does it make sense to convert a Traditional IRA to a Roth when the market’s down?

    If your modified adjusted gross income (MAGI) is $100,000 or less and you are not married filing separately, you may initiate ... Read Answer >>
  6. Earnings within a Roth IRA are tax free, so are these earnings included in the modified ...

    There are two possible answers to this question, depending on whether or not the distribution from the Roth IRA is qualified.Earnings ... Read Answer >>
Related Articles
  1. Retirement

    Roth IRAs: Contributions

    Funding an IRA A Roth IRA can be funded from several sources: Regular contributions Spousal IRA contributions Transfers Rollover contributions Conversions Recharacterizations Roth IRA Regular ...
  2. Retirement

    Assessing the Value of the Roth IRA Conversion

    Learn how the interplay among an intricate web of factors in a Roth IRA determines the strategy’s potential value.
  3. Retirement

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  4. Financial Advisor

    Is a Roth IRA Conversion Right for Your Client?

    Here are the factors advisors and their clients need to consider when it comes to Roth IRA conversions.
  5. Retirement

    Roth IRAs: Conclusion

    Like the Traditional IRA, Roth IRAs are flexible, and they are a popular way for individuals to save for their retirement. Roth IRAs differ, however, because assets can grow on a tax-free basis. ...
  6. Retirement

    Roth IRAs: Investing And Trading Do’s And Don’ts

    Just what can you invest in in a Roth IRA? And what constitutes a prohibited transaction?
  7. Retirement

    5 Reasons to Convert a Roth To a Traditional IRA

    Here's a quintet of cases when the traditional IRA trumps the Roth version.
  8. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  9. Financial Advisor

    Why Some Advisors are Shy to Convert Roth IRAs

    Potential upcoming changes from the Obama Administration could hit rollovers from traditional to Roth IRAs, and that has advisors reluctant to convert.
  10. Retirement

    Must-Know Rules For Converting A 401(k) To A Roth

    In 2008, the IRS spelled out the details for converting employer-plan funds directly to Roth IRAs.
RELATED TERMS
  1. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
  2. Roth IRA

    An individual retirement plan that bears many similarities to ...
  3. Ordering Rules

    The order in which Roth IRA assets are distributed. Assets are ...
  4. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center