Reporting IRA conversions

[Guest billbill]

In looking over IRS form 8606 which reports traditional IRA to Roth conversions, I become confused by Part II lines 16 -18.

I am converting my traditionals to a Roth as a result of the large decrease in value they experienced in the latest market downturn. As it works out, my conversion amount (line 16)will be substantially less than my basis (line 17) leaving me with a negative total on line 18 - the taxable amount. Line 18 is then reported on line 15b on the 1040 and will show a negative IRA distribution.

Could this be correct? If it is, I will not owe any taxes on the conversion. It is a significant point that should be brought to the attention of others who find themselves in a similar situation.

Example: Line 16 Amount converted $10,000 (current value)

17 Basis 20,000 (contributions/

rollovers)

18 Taxable Amt. (10,000)

(subtact 17 from 16))

What have I missed? Thanks for the help.

[JAMES PATRICK]

If your contributions were non-deductible and totaled $20,000 than you aren't missing anything.