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IRAs and Roth IRAs
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Taxation of Multiple ROTH IRA conversions

I converted a non-deductible traditional IRA to a Roth IRA in 2010 with about a $10k loss. we converted my wife's non-deductible traditional IRA assets to her Roth IRA with about a $12k gain. We have no other traditional IRA assets for the formula. When we do our 2010 taxes married filing jointly, will they combine on a single worksheet, so that we only pay taxes on a combined $2000 net gain, or will I owe no taxes but we have to pay taxes on a $12k gain for my wife? Thanks in advance!

Zip Code: 27712

Re: Taxation of Multiple ROTH IRA conversions

For the Roth conversion, you and your spouse will each need to complete your own Form 8606, and determine your taxable income or loss from these transactions separately.

When you complete your tax returns for 2010, you'll need to report your wife's $12k of income on the IRA line, and then you'll take your $10k loss as a miscellaneous itemized deduction. Since these losses are only allowable to the extent they exceed 2% of your income, and then end up not being allowable if you are in the AMT, there is a good chance that the $10k loss won't save you any federal income taxes.

For your wife's income, don't forget that you can make an election to split her $12k of income over two years, and report $6k of income in 2011 and the remaining $6k in 2012.

Zip Code: 01801