If I purchased a traditional IRA in 1985 and cashed it in 2017, shouldn't the original amount be deductible (the 1099-R I was provided shows the entire IRA as taxable)?

[kungdze]

This was strictly a cash transaction. No other contributions or withdrawals were made, only accumulated interest. I've never completed a form 8606 on this IRA.

[PaulaM]

If you made a traditional IRA contribution in 1985, and the contribution was deducted from your 1985 tax return, the entire balance would be taxable. If your 1985 was a non-deductible contribution (reported on Form 8606) then that amount would not be taxed when you took the distribution in 2017

[kungdze]

Thank you. Your reply is clear and answered my question.

[PaulaM]

You are welcome 🙂

[dmertz · Accepted solution]

Nondeductible contributions were not permitted to be made to traditional IRAs until 1987, so the 1985 contribution could not have created any basis in nondeductible traditional IRA contributions.

Form 8606 does not apply to any particular traditional IRA of yours, it applies to all of your traditional IRA accounts in aggregate.  If you made contributions to any traditional IRA for 1987 or later that were nondeductible and filed a Form 8606, some amount of your distribution from the traditional IRA that you opened in 1985 will be nontaxable and your 2017 tax return is required to include Form 8606 to calculate the nontaxable and taxable amounts, as well as the amount of nondeductible contributions that remain in your traditional IRAs.

Because the IRA custodian has no way to know if you ever made any nondeductible contributions to a traditional IRA, a Form 1099-R reporting a regular distribution from a traditional IRA is required to have box 2a equal to box 1 and have box 2b Taxable amount not determined marked.  It your responsibility to track your nondeductible traditional IRA contributions and file the necessary Forms 8606.