IRA Non Deductible Contributions For Closed Account

[Romper]

I've been taking RMD's from my Traditional IRA account for a number of years.

I've also kept track of the non deductible contributions I made during my working years and TurboTax has deducted the appropriate percent to arrive at my taxable RMD amount for each year.

The Traditional IRA account balance is now around $40k and this year's RMD will close the account.

There is still a balance of ~$20k in the cost basis.

My remaining RMD for 2024 and future RMD's will come from a Roll Over IRA from my 401k.

According to Form 8606, the non deductible contributions only apply to Traditional IRA's.

Is there a way to apply the $20k basis to the sale and closing of the account?

Thanks in advance.

[dmertz]

Unless you've had poor investment performance in your traditional IRAs or in accounts that were rolled over to your traditional IRAs, it seems unlikely that you could have basis in nondeductible traditional IRA contributions that exceeds the remaining balance in your traditional IRAs.

Your basis in nondeductible traditional IRA contributions applies to all of your traditional IRAs in aggregate, not to any particular one of your traditional IRAs.  When Form 8606 is prepared, line 6 is to show the combined balance of all of your traditional IRAs, including your rollover IRA.  Unless your rollover IRA has a balance of less than your remaining basis in nondeductible traditional IRA contributions, your basis will be finally entirely consumed when your total balance in traditional IRAs is zero at year end.

[Romper]

Thanks for again responding..

Line 6 on Form 8606 states "Enter the value of all your traditional...etc.  IRAs plus any outstanding rollovers"

My confusion comes from the instructions for Line 6..

"For purposes of line 6, a rollover is a tax-free distribution from one traditional ...etc. IRA that is contributed to another traditional, ...etc. IRA"

It seems you are saying that a Rollover IRA from a 401k is considered a Traditional IRA.

Correct?

If correct, I simply continue to report in TurboTax showing the non deductible contributions as usual.

[dmertz · Accepted solution]

"you are saying that a Rollover IRA from a 401k is considered a Traditional IRA. Correct?"

Correct.

There is actually nothing in the tax code that defines a "rollover" IRA as a type of IRA or distinguishes it from an ordinary contributory IRA.  It used to be that rollovers from an IRA back to an qualified retirement plan like a 401(k) could only be done from a so-called conduit ("rollover") IRA.  That IRS requirement disappeared years ago although some qualified retirement plans still enforce this requirement.

[Romper]

As usual, thanks for the clarification, that simplifies things.