Tax Season's 1st dumb question:

[JG EA]

The taxpayer had a Roth IRA. The taxpayer's employer also started a Roth 401k. Then the employers Roth was stopped and that money was transferred to a Roth IRA for the taxpayer. I don't know if it was combined with the 1st one or not.

TP took out all of his Roth IRA money. His basis in the first Roth would cover both the amounts that he took out. (Lost Money.)

Can I combine these amounts to be covered by the basis? I'm guessing yes since the 1099's look exactly the same.

Do you think TP will be getting a third 1099 to cover the Roth 401K distribution or do you think one of them is for that and one of them is for the first one?

[Gretel]

I am a little confused. Seems like TP received 2 1099's from same company for same Roth?
So, when 401 Roth was disolved a 2nd account was created, or why 2 1099's and maybe a third one?

I think his basis is for the total of the funds. Should not be different then money taken out of an IRA. If TP has several IRA's they are looked at one big IRA for purposes of non-deductible contributions.

Another point is the TP can take loss if all Roth funds are distributed to him.

[JG EA]

Yes two 1099's. I'm not sure if from the same Roth. (It does have the same account number though.) Maybe that is their way of keeping it straight where the money came from.

I was just wondering if there would be a third. but you put me on the right track. That helps about what you think of the basis. I was thinking that all of the money (when the 401 Roth stopped) should be taxable. If he had just taken it wouldn't it be taxable? But apparently it was a qualified rollover to keep this money deferred. And since that part of it went down like the other Roth money then TP is only "taxed" on what is left when he actually takes it out. Will there be a rollover 1099? We'll see.

A loss on A won't help because of the 2% and not enough other A deductions.

Thanks.

[joanmcq]

Isn't the issue for the rollover just whether it was kept for 5 years? basis is going to be contibutions & as long as it satisfied the holding requirements returns of basis is nontaxable.

[Gretel]

Yes, for the rollover the 5-year limit applies. But if he had a Roth already and the basis in the first Roth was more than all of his distributions then it is just a return of his contributions. None of this should be taxable or subject to penalty.