The pro-rata calculation involves all funds in your traditional IRAs at year end no matter how the funds got into your traditional IRAs; all of your traditional IRAs are treated in aggregate a if they were one large traditional IRA. A large pre-tax amount rolled over to a traditional IRA from a 401(k) (the money in your rollover IRA) will greatly reduce the non-taxable amount and greatly increase the taxable amount of any Roth conversion performed during the year, leaving a large portion of your basis in nondeductible traditional IRA contributions in your traditional IRAs to be applied to future traditional IRA distributions.
This answer has been verified for accuracy by an Intuit expert employee
