dmertz
Level 15

Get your taxes done using TurboTax

Nothing about the earnings in the traditional IRA causes an excess contribution.  Perhaps that was just poor wording by Mike9241.

 

Presumably there was nothing in your wife's traditional IRA(s) prior to the traditional IRA contribution in question.  There is nothing technically wrong with investing in the traditional IRA prior to doing the Roth conversion.  The only effect is that there could be an investment gain or loss prior to the conversion.  If there is a gain, a Roth conversion will be partially taxable.  If there is a loss, the Roth conversion of the entire account will be nontaxable but there will be some amount of unrecoverable traditional IRA basis.  Under these circumstances it's usually suggested that the IRA owner convert slightly less then the entire account; the slight remaining amount will preserve the basis and allow it to carry forward.

 

(As Mke9241 said, if your wife has other money in traditional IRAs, a Roth conversion will be partially or mostly taxable, with only a portion of the basis in nondeductible traditional IRA contributions applied to the conversion and the remainder staying in your wife's traditional IRA(s) to be applied to future distributions until there is no more money in her traditional IRAs at year end.)