If my only TradIRA bal @12/31/18 was 4.9k(contrib 5.5k post tax $ in 2018 with a 600 loss) why am I subject to pro rata converting 5.5k post tax contrib made in 2017?

[dmertz]

You'll always have some basis in traditional IRAs until your year-end balance is zero.

[mgoodman1]

Ok think im starting to understand. But on my 2019 return, wont there be basis carried over from the 2018 form 8606 even if the balance is zero?

[dmertz]

I've attached screenshots to my answer.  Because you did nondeductible contributions in the same year as a conversion, TurboTax is choosing to do the calculations on the Taxable IRA Distribution Worksheet for each year even though the calculation could have been done directly on Form 8606.  The result is the same, though.

Because you had a $4,900 2018 2018 year-end balance, line 14 of the 2018 Form 8606 shows that you'll be carrying $3,109 [not $3,910 as originally typed] of basis into 2019.  If you similarly make a $6,000 nondeductible traditional IRA contribution for 2019 in 2019 and convert the entire $10,900 to Roth, $9,109 will be nontaxable and $1,791 will be taxable, leaving you with a zero 2019 year-end balance and no basis to carry forward to 2020.

(Of course the numbers might be slightly different due to investment gains or losses.  I've assumed exactly $4,900 for your 2018 year-end balance and zero investment gain or loss in the traditional IRA after that.)

[mgoodman1]

i can make it bigger...never mind, i think you meant 3109?

[mgoodman1]

thank you so much for all your help,

[mgoodman1]

i think I finally understand. Can't thank you enough, Lesson here is do all contributions and conversions in the same calendar year, and avoid the pro-rata rule

[dmertz]

Sorry, a digit swap on my part.  I meant $3,109, very close to your result, probably differing only because your 2018 year-end balance was slightly different from $4,900, probably about $4,927.

[fanfare]

if you experience a loss in your IRA, the money is gone. There is no tax break or other adjustment.

[fanfare]

you're don't get taxed on your basis. a larger basis ($5,500 vs $4,900) is to your advantage.