BPickerCPA

Appleby is correct.

The IRS knows that you rolled over $33K and is assuming it is all taxable. However, if you had made non deductible IRA contributions to the traditional IRA, then some of the $33K is NOT taxable. So you need to compute the taxable amount on form 8606. The form you're looking for is a form 5498, but I don't know what good it will do you. If you only made deductible IRA contributions, then it looks like you owe $14K. It's too late to undo the transaction.

You need a TIN for the estate. You can't use the social security number after death.

Dory, The answer to your original question is yes. But only the surviving spouse who is the sole beneficiary would be able to set up such an IRA. Since in your case the sister is the beneficiary, you are out of luck.

The question is NOT stupid. But the fee structure surely is! No normal mutual fund that I am aware of charges this type of fee structure. The WORST case scenario is a front load on a mutual fund, plus an annual custodial fee. I would strongly suggest you look to set up your Roth at a no load mutual fund company, or someplace like Charles Schwab which has a ton of mutual funds with no load to choose from.

You CANNOT take an MRD from one to satisfy the requirement to take an MRD from the other. You will have to take an MRD from the DB plan and from the IRA. If you have multiple IRAs you can take a distribution from one IRA large enough to satisfy the requirement for all the IRAs.

What you're saying is NOT correct.

jaemmons, Why do you say an exception applies? The termination is occuring in the year PRIOR to the year the employee attains age 55. The distribution is being taken in the year the employee attains age 54. Therefore, to my understanding, NO exception applies.

The 60 days is absolute. If you replace it within 60 days, fine. If you can't then it's a distribution and cannot go back into the Roth.

I understand there will be IRS guidance on this question within the year. No idea what that guidance will be.

Carol, Let's make it a qualified "no". You can take the money as long as you replace it within 60 days. After than you're out of luck. If you do take the money and replace it within 60 days, you can only do this move once in any 12 month period, meaning once you do it, you can't do it again for at least a year after.

Depending on your father's age when he died, and possibly on elections he made while still alive, you should have taken some, or possibly all of the account out by this time. The penalty for not doing so is 50% of the account balance. The procedure for getting the penalty waived is to pay the penalty (and interest running from the year that you should have paid the penalty) and then request a waiver of the penalty, for cause. I strongly suggest contacting a knowledgeable professional in this area, to work it out. The sooner the better. Also, you needed to make any applicable election in the year following his death, meaning 1996, not two years. Barry

You have basis in your Roth account. Basis is not income. The Courts have decided this long ago. Basis cannot be taxed, since it is not income.

I cannot predict the future, but there is NO way the govt can tax the portion of Roth money that has already been taxed. So the worst case scenario is that they can tax the Roth earnings. Even that is of questionable legality IMO since the people who paid the tax on the conversions, and even those who contributed the already-taxed money, did so based upon an understanding of the tax law. I would guess that any change would either freeze the accounts and stop new contributions/conversions, or pick a date (12/31/xx) and tax the earnings subsequent to that date.

You cannot roll directly from a 401k to a Roth. You must roll the 401k into a traditional IRA first. Then, if you are eligible, and desire to do so, you can convert the traditional IRA into a Roth. Whether you should or shouldn't is beyond what we can answer from the limited info given.

I don't have the pub in front of me right now, but there are two possibilities for the 10% penalty. One is that the amount that was supposedly converted is now subject to the 10% penalty (if an exception does not apply), since the conversion was not valid. The second possibility is that when the now excess contribution is withdrawn along with the applicable income, the 10% penalty will apply to the applicable income.

As long as joint adjusted gross income is under $150K, both spouses can contribute to a Roth IRA since compensation exceeds the total IRA contribution. Inheritance is irrelevant, since that does not count as income.

66½ or 70½? I'm reading 70½ in reg. 1.401(a)(9)-2, A-2©.

Yes, if she is the sole beneficiary. She has to take the year of death distribution if the decedent hadn't taken it. After that, she can treat the account as her own and not take a required distribution until she's 70½.

The deadline for recharacterizing a year 2001 conversion is OCTOBER 15, 2002, as long as the 2001 is timely filed, including extensions. No one needs to get a PLR at this time; the extension until October 15th is AUTOMATIC. As far as the 1040X is concerned, the important thing is that you are canceling the conversion income, and, if otherwise eligible, you are adding a deduction for an IRA contribution. If not eligible for the deduction, you need a form 8606 to show the non deductible IRA contribution. As an aside, it doesn't pay to recharacterize the contribution unless you are getting a deduction for it, and even then there may be some debate on the advisability of it.

Add, to add to Mary's post, will leave the successor trustee very vulnerable to a lawsuit by the beneficiaries. It doesn't pay to cut corners, IMO.

Your interpretation could be correct, but I would argue that you get the spouse's life estate. I don't know that I would win the argument, though.

This only works if you have enough cash in the Roth IRA to buy the real estate outright (no mortgage). There are other negatives, like finding a custodian for the Roth IRA who will handle this, at a reasonable price.

Actually, there is no such thing as a spousal IRA contribution. There is just an IRA contribution. Whether it's valid due to her earnings or her spouse's earnings is immaterial, and only of concern in dealing with the IRS.

The penalty will be based on the value at the time of the withdrawal.