IRA Roth Conversion

[cbuckstr]

My husband wants to do a IRA Roth conversion.  Can you do stock in stead of cash?  The stock value is over $10,000.   I contribute to a Roth in my 401K and so does he.  based on what we made last year we can only contribute $7000 per year to a Roth.  Can we also convert  to a Roth in 2020 too?       If we can do this amount, will the 5 year withdrawal rule apply only to this amount we convert?  What about dividends.  Do we have to weight 5 years to take the dividends?

[macuser_22]

The $7,000 contribution limit is contributing new money to an IRA and has nothing to do with a conversion whatsoever.   You can convert any amount at any time.

There is a separate 5 year rule for each conversion.

Whether you can convert stock or not (in-kind conversion) depends in the rules of your financial institution.   The taxable amount would be the market value at time of conversin. 

[RobertG]

The IRS allows you to move either cash or property from your traditional IRA to your Roth IRA.

Stocks count as property, which means that rather than taking out cash from your traditional IRA and putting it in a Roth IRA, you can simply take out the stocks and redeposit them in your Roth IRA. For example, if you own a certain stock in your traditional IRA and want to continue to hold that same stock in your Roth IRA, you can move the shares rather than having to sell the shares, move the money, and then reinvest in the same stock.

The amount of your conversion usually adds to your taxable income for that year. Even though you’re transferring stocks, you still have to pay the higher ordinary income tax rates on the conversion rather than the lower capital gains rates.

 If you’ve made nondeductible contributions to the account, a fraction of your conversion will be nontaxable.