Retirement tax questions

Hello @macuser_22 

I read your post couple of times and it seems my situation is similar. But I do still have a question. Here is my scenario:

In year 2017, my spouse had made a one-time "deductible" contribution of ~$4K to traditional IRA.

Then last year in 2020, she did a backdoor $6000 "non-deductible" contribution to traditional IRA and then immediately converted $6000 to Roth IRA. Her form 5498 for year 2020 shows a IRA contribution of $6000, but it also shows a fair market value of $4.5K (its not zero). Now in turbotax, we followed all the steps to do backdoor roth, but we see a taxable distribution of ~$2500. What is this amount and what are the various options to make it $0? Can she convert her entire traditional IRA balance to Roth in 2021 to avoid this tax? Is there any other option to avoid this tax? Or is it too late?