ROTH conversion in 2010......

[superman]

Client converted his traditional ira last year to a ROTH and this year and next was going to pay the taxes. This year client comes in and has taken the money out of the ROTH to buy a new house.

Question: Does this client now have to pay the tax on all of this money because he did not wait the 5 year holding period?

Thanks,
Superman

[Lion]

Kinda

He owes tax on the full amount converted all in one year, because he has to pay tax on half per the special condition for 2010 conversions PLUS any additional withdrawn. Because he withdrew it all, all the taxes are due for 2011. The five-year rule kicks in to add a 10% early withdrawal penalty, on the earnings only, I think. Or is it on the whole amount in this case? It's almost 3 a.m., so don't expect much from me!