"is each conversion tracked separately based on the amount transferred and not the equity transferred?"
Each year's Roth conversions are tracked separately based on the value that is converted whether the conversion is done with cash or in-kind. Investment performance within the Roth IRA post conversion has no effect on the amount of the conversion basis that resulted from value converted on the date of a particular Roth conversion.
For example, if you do an in-kind conversion of shares valued at a total of $10,000 at the time of the conversion, you still have $10,000 of conversion basis whether the share value increases or decreases With the shares are in the Roth IRA. if the shares double in value, you have $10,000 of basis from this Roth conversion and $10,000 of investment gains which would be considered to be earnings.
