I had a traditional IRA that I rolled over
from a 401k in 1993. I did nothing with
the account until late 1998, when I converted
it to a Roth and made a $2000 contribution.
I paid the taxes the following year in full.

At the peak of the market the account was
worth nearly 10,000 dollars but now is about
65% of that and losing ground steadily.
I am heavily in debt and need to withdraw
the account.

I've been trying to read up on the parameters
and it's very confusing. It seems to me
that I should not owe tax, just the 10%
penalty. After calling my broker who was
virtually no help! and reading the IRS
pubs, I am still not clear. Do I have it
right? What about the 5 year rule on
contributions, does it apply in this case?

Earl Baker

If you terminate your Roth at this time, you can remove $2,000 without penalty since that represents your annual contribution. Anything above that will be subject to the 10% penalty.

You may be entitled to an itemized deduction for the decline in value.

This assumes that what you mentioned is the sum total of all roth contributions and conversions, and you completely terminate your roth account.