All instructions I’ve ever read to determine the tax-exempt percentage of a withdrawal from a Trad IRA requires dividing the basis of a Trad IRA by its total value at the end of the previous year. In my case, however, the total value of my Trad IRA at the end of 2023 was $zero, and two different Trad IRAs were opened in 2024.
Early in 2024, I made a $1000 deposit of after-tax dollars. A few months later, it had earned $50 and I converted the total, $1,050, to my Roth IRA.
Later in 2024, my advisor convinced me to roll over $9,000 from a 401(k) to a Trad IRA. All contributions to the 401(k) had been in pretax dollars (no basis). Before the end of 2024, $250 was withdrawn from this IRA.
How much of the conversion and the withdrawal is taxable vs. tax exempt? For the conversion, are $1000 tax-exempt and $50 taxable, and then is the entire $250 of the withdrawal taxable?
Or do I have to calculate the percent of after-tax money deposited into the accounts during the year [$1,000/($1,000 + $9,000) = 10%], and then multiply the conversion amount and the withdrawal by that factor to determine the tax-exempt amount [10% x $1050 + 10% x $250 = $105 + $25 = $130 tax-exempt and $1,170 taxable]?
Or is it calculated by yet some other method?
