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    Roth Conversion

    Is the stock that is converted from an IRA to a Roth taxed at the value of the stock on the date and time of transfer?

    #2
    You are talking about a conversion involving the stock property directly (as opposed to selling, moving the cash, then re-buying)? I don't know about the time of day, but I can't think of any other way for the dollar amount of the conversion to be calculated than value on the date of transfer. Since taxpayer has no control over daily price fluctuations, does it really make any difference? It's gonna be what it's gonna be.

    If they want to lock in a precise taxable amount, they need to sell for that amount and then convert the cash.
    Last edited by Rapid Robert; 09-14-2022, 11:27 AM.
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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      #3
      Thanks. Yes I was referring to a direct conversion of a stock, conducted primarily to avoid a wash sale issue. I agree it probably cant be stated any more specifically than the date, but I was wondering if there was a sudden jump in price on that day (after the conversion) would the IRS consider evidence of the time of the transfer? I know this is going into the weeds a little too much as Wash Sales are difficult to enforce in IRA's but who knows with the added enforcement and "efficiency" the IRS is marshalling.
      Last edited by Dude; 09-15-2022, 11:05 AM.

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        #4
        For some issue (DOD valuation?) the average of the day's open and close is the calculation. Don't know if qualifies for a reasonable method in your case...

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          #5
          I'm not even sure you can "convert" assets from a retirement account into a Roth IRA account.
          A client has, for the past several years, annually converted $25k withdrawals to a Roth IRA. Assets are sold within the originating retirement account, a payment (reported on Form 1099-R) ensues, and the FUNDS go into the Roth IRA account. He pays federal and state taxes on the $25k. (The amount received varies slightly due to market conditions when the sale was made.)
          Of course it's a matter of pay me now or pay me later, but his goal is to reduce future RMDs and IRMAA issues.
          (I'm also doubtful if anything related to wash sale rules is relevant to any IRA/401k account. Could be wrong, of course. . .)
          Last edited by FEDUKE404; 09-16-2022, 05:04 PM.

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            #6
            "Yes I was referring to a direct conversion of a stock, conducted primarily to avoid a wash sale issue"
            "(I'm also doubtful if anything related to wash sale rules is relevant to any IRA/401k account. Could be wrong, of course. . .)"


            A wash sale situation would only exist if there was a sale at a loss of identical stock within 30 days of the conversion date from a regular, after-tax (brokerage) account, which we have not been told about. There would not be a wash sale related to the conversion itself.

            Yes, it is possible to perform a conversion by transferring the property (stock) itself, without a sale/re-purchase transaction.

            From TheTaxBook: "A wash sale occurs when a taxpayer sells or trades stock or securities at a loss and within 30 days before or after the sale acquires substantially identical stock or securities in an individual retirement account (IRA) or Roth IRA. (Rev. Rul. 2008-5)"

            The reason this is to be avoided is because while the loss is disallowed as a wash sale loss, there is no compensating increase in basis in the IRA (see the Rev. Rul.)
            Last edited by Rapid Robert; 09-18-2022, 10:52 AM.
            "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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              #7
              Thanks for the replies. So what you are saying is that while the wash sale would apply it would only apply if the stock is sold at a loss from a brokerage account then deposited to an IRA. Selling at a loss in an IRA then repurchasing the shares in a Roth IRA would not trigger the wash sale rule.

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                #8
                "Selling at a loss in an IRA"

                That is normally not possible, as there is normally no basis in the Trad. IRA. Even if there was some basis and you converted the entire account for an amount less than that basis (highly unlikely unless you just opened the account in the last few years), under TCJA that loss is temporarily not allowed as a 2%-AGI itemized deduction, and even if it were, it is not treated as a capital loss and I don't see how wash sale rules would apply.

                So yes, I am saying that in your scenario involving only a Roth conversion there is no wash sale to account for at all. (if anyone thinks I'm wrong please provide code/reg citations).
                "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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                  #9
                  Originally posted by Rapid Robert View Post
                  Yes, it is possible to perform a conversion by transferring the property (stock) itself, without a sale/re-purchase transaction.
                  Just curious: In such a scenario, how is the taxable amount calculated so as to be reported on the Form 1099-R and also on Part II of Form 8606 ??

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                    #10
                    "In such a scenario, how is the taxable amount calculated"

                    It will undoubtedly be some version of FMV as of the date of conversion. The precise details are what the original question was about, so far no one has posted an answer to that. Probably the IRA custodian is in a better position to provide details. And my point was that the taxpayer can't ultimately control the value with precision, so it doesn't really matter about the intra-day details.
                    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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