Converting to a Roth IRA with Taxes Paid from Corpus of the Traditional IRA

6 Pages Posted: 31 Oct 2015

See all articles by Ronnie Clayton

Ronnie Clayton

Jacksonville State University (Florida)

Lamar Clayton

Independent

Lemuel Davis

affiliation not provided to SSRN

William Fielding

Jacksonville State University, Alabama - Department of Economics

Date Written: 2014

Abstract

Congress eliminated the income limit required for converting a Traditional Individual Retirement Account (IRA) to a Roth IRA in 2010. The conversion must be recognized as income for tax purposes in the year of conversion. The converter may choose to pay taxes from other sources or to pay from the corpus of the Traditional IRA. A converter younger than 59½ years of age at conversion must pay an additional tax penalty. This study examines the conversion process and the tax consequences of converting a Traditional IRA to a Roth IRA and discusses the complexity of the decision to convert when taxes are paid from the corpus of the Traditional IRA. Conversion under this circumstance is likely not an attractive alternative.

Suggested Citation

Clayton, Ronnie and Clayton, Lamar and Davis, Lemuel and Fielding, William, Converting to a Roth IRA with Taxes Paid from Corpus of the Traditional IRA (2014). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 24, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=2683998

Ronnie Clayton (Contact Author)

Jacksonville State University (Florida) ( email )

11901 Beach Blvd.
Jacksonville, FL 32246
United States

Lamar Clayton

Independent ( email )

Lemuel Davis

affiliation not provided to SSRN

William Fielding

Jacksonville State University, Alabama - Department of Economics

Jacksonville, AL
United States

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