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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12446
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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A traditional IRA was converted to a Roth in 2010 and left

Resolved Question:

A traditional IRA was converted to a Roth in 2010 and left a $13,000 tax bill. The value fo the portfolio is now down about 90%.

What is the best way to erase the tax liability?
Submitted: 8 months ago.
Category: Tax
Expert:  Megan C replied 8 months ago.

Megan C :

Thank you for your question. My name is XXXXX XXXXX X will be happy to help you today.

Megan C :

How are you doing today?

Megan C :

Typically, the only ways to reduce tax liability are to have business losses, itemized deductions, and various tax credits.

Megan C :

You cannot write off the decrease in the value of the portfolio.

Customer: So that means that once the Roth conversion was filed it locked in the tax liability. Is that correct.?
Megan C :

That is correct, unfortunately. Had the loss taken place in the traditional account and then you did a conversion it would be based on the lower amount.

Customer: Thanks.
Megan C :

You can write off the loss, only if you close out the Roth IRA account.

Megan C :

IF you close it, you can take a deduction equal to the difference between your basis in the account and its value when you close it down

Megan C :

But, if you don't want to close the account, you can't deduct the loss from year to year.

Megan C :

But, this would not offset the 2010 tax bill - it would impact you in the year of the account closure.

Megan C :

You can read about this option, HERE

Customer: If I close the account is closed then is it possible to open another?
Megan C :

You could open another in a later year

Customer: If I closed it in December then is it possible to open it in January?
Megan C :

Yes, you could do that.

Megan C :

All of your Roths though must be closed - even if you have a second roth that has a profit.

Customer: Thank you very much.
Megan C :

You're welcome

Megan C :

Is there anything else I can help you with todya?

Megan C :

If not, please rate me positive so that I can receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12446
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 6 other Tax Specialists are ready to help you

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