Converting Inherited IRA to Roth IRA

[Guest Albert Lin]

Has anyone here handled an inherited IRA, for a client over age 70 1/2, who may wish to convert the inherited IRA to a Roth IRA?

My facts have a client inheriting an IRA from her husband, who died in 1998. It appears that the first required minimum distribution attributable to that inherited IRA will not have to be made until December 31, 1999.

This minimum distribution will likely be over $100,000. The client is considering part of the IRA to a Roth IRA. I am wondering if the 1999 required minimum distribution will somehow implicate the $100,000 modified AGI limitation in 1998, even though the required minimum won't have to be distributed until 1999.

My interpretation is that the 1999 minimum distribution will not impact the 1998 modified AGI limitations, but wonder if anyone here has already looked at this issue.

Thanks!

[BPickerCPA]

You CANNOT convert an inherited IRA. What a spouse can do however, is to treat the IRA as her/his own, and then that IRA can be converted. If the spouse died in '98, and the required distributions will be over $100K, then it looks like '98 is the only year you can convert it to a Roth. But it MUST be put into the survivors own IRA first.

[Guest Albert Lin]

Sorry Mr. BPicker, I left out one fact. The client has effectively treated the IRA as her own, since the required minimum distribution for this year was not made with respect to the time period applicable to the deceased spouse. I had referred to Prop. Reg. 1.408-8, Q&A A-4(B). I found out that the client's CPA did change the account to the survivor's name.

Thanks for your reply!