Roth Conversion 2010

[bzorc]

A taxpayer asks this question. He is planning to convert a traditional IRA to a Roth in 2010, and wants to elect to spread the tax payment over the 2 year period. Question that is raised is what happens if the taxpayer passes away in 2010 after the conversion is made? Does the conversion amount become taxable in 2010, or does it still spread over the 2 years?

Any replies are appreicated!

[Guest Sieve]

The Code indicates that someone who converts a traditional IRA into a Roth in 2010 is not permitted to die before 2012. That requirement is carried over into the proposed regs.

Actually . . . upon death prior to including all 2010 converted amounts in income, all remaining amounts are included in income in the year of death (IRC Section 408A(d)(3)(E)(ii)(I)) or, if the spouse acquires the Roth IRA interest upon death, the spouse can elect to continue to include the converted amounts in income in the years in which they would have been included had the death not occurred (IRC Section 408A(d)(3)(E)(ii)(II)).

[WDIK]

The Code indicates that someone who converts a traditional IRA into a Roth in 2010 is not permitted to die before 2012. That requirement is carried over into the proposed regs.

Talk about the expanding power of governmental agencies...

[Guest jims]

The question stated "...and wants to elect to spread the tax payment over the 2 year period." Keep in mind spreading over 2 year period is the normal default action. You only make an election if you want the taxable income all included in 2010.

[Guest Sieve]

Correct, during lifetime. But on death, the default is to accelerate the inclusion in income and to include all untaxed amounts in income in the year of death--the beneficiary spouse, however, may elect to continue the IRA owner's 2-years spreadout.