loss on conversion -- reporting requirements

[Guest joedon]

It turns out that my broker misidentified my new IRA in 1998, so instead of him opening a Roth for me, he opened a traditional IRA instead. In December 2001, with the mistake fully realized, I converted the traditional to a Roth.

Because of stock market changes, I was actually sitting on a loss in the account. I had made nondeductible (after-tax) contributions of $2,000 for four years, so my basis was $8,000. The amount I converted was $6,500.

Clearly, I don't seem to have any tax liability in this scenario, but I'm unclear on where (or if) I have to report this conversion on tax forms. If I have to fill out a Form 8606, Part II is certainly simply enough -- the conversion amount and the basis in that amount, on lines 16 and 17, would be $6,500, leaving zero for the taxable amount in line 18. But do I have to fill out Part I of that form? (I never did fill out an 8606 in previous years, even though it turned out that I had been making nondeductible contributions to a traditional IRA for the previous four years -- which apparently calls for an 8606.)

Also, it would seem that the $6,500 would be considered a distribution to be listed on line 15a of Form 1040. I did receive a Form 1099 from my IRA trustee showing that amount. But since the same trustee handled the old and new account, do I need to report that as a distribution, since it represents a loss on after-tax money?

Thx for your insight.