The Front Door Opens Wide for the Backdoor Roth IRA
8 Pages Posted: 5 Jul 2017
Date Written: May 29, 2017
Invoking allusions to Caligula and Roman tax law, the Sixth Circuit, in Summa Holdings, reversed the Tax Court and held that the Commissioner could not use the substance-over-form doctrine to prevent taxpayers from combining the tax savings effects of a domestic international sales corporation with a Roth IRA. In this article, we argue that the Summa Holdings rationale supports and allows the backdoor Roth IRA — that is, making a nondeductible, traditional IRA contribution and then converting it into a Roth IRA (ostensibly to avoid the income limits on direct contributions to Roth IRAs).
Keywords: tax, IRA, Roth, Roth IRA, tax planning, retirement planning, substance over form, Tax Court
JEL Classification: K1, K00, K19, K2, K34
Suggested Citation: Suggested Citation