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Retirement tax questions
Yes, the rollover of, say, $2,256 from the 401(k) has increased your traditional IRA year-end balance to make your Roth conversion partially taxable. The expected nontaxable amount would be 5500 * 5500 / (5500 + 2256) = 3900, making $1600 taxable. $1600 of basis remains with your traditional IRAs.
It probably would have made sense just to roll the 401(k) distribution to a Roth IRA instead. It would have cost you only an additional $656 of taxable income or so for 2016. It probably makes sense to do the conversion of this now in 2017, rather than continue to carry $1600 of basis.
‎June 6, 2019
3:12 AM