Does IRA distribution calculation (in 8606) prefer to take the taxable amounts first over non-taxable?

[Pantelis]

I had 0 in my IRA (12/31/23). Then I contributed $8000 nondeductible. Then I converted $8012 to roth-ira and by end of 2024 I had $20. So total interest $32, but I had already moved $12 of it out to roth. 8606 line 13 (nontaxable distribution) shows $7980 and line 14 (basis) $20. I'd expect 8k non taxable distribution frankly and maybe 0 basis? Is this a TT or an 8606 artifact? Thanks

[dmertz · Accepted solution]

Your conversion is required to be a proportionate mix of nontaxable and taxable amounts, so the calculation performed on your Form 8606 is correct.  The nontaxable portion of your conversion is $8,012 * $8,000 / $8,032 = $7,980.  That leaves $32 of the $8,012 conversion taxable and $20 of basis remaining in your traditional IRAs.  Had you converted the entire $8,032 to Roth, that would have resulted in $8,000 being nontaxable and $32 being taxable.