Keogh & IRA

[Catherine]

Hi folks --

I've looked and can't find the answer - someone here must know.

Client has an IRA that contains some non-deductible contributions (basis known), AND money from a Keogh that was converted. Client is considering converting at least some of this to Roth IRA. Question is, to get the percentage of non-deductible money, is the original Keogh contribution used, OR the value when they were rolled into the IRA?

TIA,

Catherine

[Gail in Virginia]

I believe that you only use the amount of the original non-deductible contributions. Since the earnings were never taxed, they can't be treated as though they are non-deductible contributions to get the percentage of non-deductible money since what you are really determining is the amount that is not taxed upon withdrawal.I am not sure that I am stating this well, so I hope that you can tell what I mean. I am not sure I quite understand your post either - when you ask about using the amount of the original Keogh contribution is that the same as the amount that was contributed on a non-deductible basis? Most Keogh plans are deductible.

[Pacun]

Give us some numbers and we might be able to understand better. For example, Keogh contributions were $30K but it grew to $40K and those $40K were rolled over to an IRA. Non-deductible IRA contributions totaled $20K. Currently there are $75K in the rollover IRA. Just by looking at the numbers, any one would say that the percentage is 66.67 for Keogh and 33.33 for non-deductible IRA. If that percentage is a very conservative number before the IRS, you might want to go with it. (I believe amount rolled over from Keogh is important, not the amount contributed).

How about this: Imagine that the Keogh rollover occurred in 1990 and that the non deductible contributions were $5K each year for the last 4 years. Do you think you should make calculations every year since your non-deductible contributions didn't make any money and the percentage will change?

I think we need amounts and years to make a good calculation.