I would like to pose the question a little differently. Going into the year my Traditional IRA taxable basis was only about 10% of the IRA values--converting to a Roth was not attractive. During the year I converted a 401K without basis into the traditional IRA as well after taking the required MRD on the 401K. Following the instructions included with the Form 8606, it seems that the total value of all IRA's at year end need to be included in line 6 (the denominator). However line 7 the numerator includes only IRA distributions (apparently the 401K distribution is excluded). That action results in a lesser amount of nontaxable basis to offset otherwise taxable income than would have been the case had the conversion not been made. This is illogical and causes me to wonder if there is an error in the instructions or my interpretation. The numerator and denominator should logically be consistent. Fortunately, the calculation will correct itself in subsequent years. Any comment? Does anyone maintain that the 401K MRD should be included in line 7
