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Returning Member

If I make a nondeductible contribution to a trad IRA of $5,500 in 2017 and then convert it to a backdoor Roth IRA, what is the basis of the trad IRA? $5,500 or Zero?

 
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New Member

If I make a nondeductible contribution to a trad IRA of $5,500 in 2017 and then convert it to a backdoor Roth IRA, what is the basis of the trad IRA? $5,500 or Zero?

Assuming that there are no other non-deductible contributions in the traditional IRA, it now has a cost basis of Zero.

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New Member

If I make a nondeductible contribution to a trad IRA of $5,500 in 2017 and then convert it to a backdoor Roth IRA, what is the basis of the trad IRA? $5,500 or Zero?

Assuming that there are no other non-deductible contributions in the traditional IRA, it now has a cost basis of Zero.

View solution in original post

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Level 15

If I make a nondeductible contribution to a trad IRA of $5,500 in 2017 and then convert it to a backdoor Roth IRA, what is the basis of the trad IRA? $5,500 or Zero?

Zero -  only if the total 2018 December 31 value of all Traditional, SEP and SIMPLE IRA's that existed are also zero, otherwise the basis must be prorated between the 2018 distribution and remaining value.  As long as any IRA exists the basis can never be zero.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**