USA Roth Conversion and Form 8606 Line 6 Instructions


rmt

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I'm questioning what the IRS really wants on Line 6 of Form 8606 when converting only one of two different types of IRAs to a Roth.

My non-deductible Traditional IRA was fully converted to a Roth IRA in 2011.

My (deductible) SEP IRA remains unchanged and (no distribution, and no conversion).

The instructions for Form 8606 line 6 state "Enter the total value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2011, plus any outstanding rollovers."

If I'm not converting my SEP IRA to a Roth, do I really need to include its value on line 6 as instructed? I'm assuming the IRS intended to instruct "Enter the total value of as of December 31, 2011 for those IRAs that you are converting." I'd further justify this interpretation because Part I of Form 8606 deals with non-deductible IRAs and distributions (neither of which apply to my SEP).

Thanks in advance for any clarification / insight.
 
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rmt

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Following up on my own question, I think I found my answer in an old thread from 2004. Excerpts from that thread below seem to suggest that the IRS *does* want to know the value of my non-deductible SEP IRA. When they say "all", they mean "all."

Excerpts from that thread:
"You are reading correctly. No matter how many separate
"accounts" you have, you still have only ONE IRA for
withdrawals. Each withdrawal is considered to be pro-rated
between the deductible, non-deductible and earnings portion
of the overall IRA. You CANNOT preferentially just withdraw
the "non-deductible" funds and leave the "deductible" (read
"taxable") funds in the account."
--
"Computation of the taxable portion of any IRA distribution
is based on the balance of all of your IRA accounts. Follow
the Form 8606 instructions. Your original assumption was in
error."
--
"You're assuming that the IRS cares which account you're
taking the distribution from. For tax purposes you only
have ONE IRA, and the tax on distributions is pro-rated
based on the tax basis of all contributions."
--
"If you have two or more accounts, you MAY pick and choose
which one from which to take a distribution. However for
tax purposes, it doesn't matter, the distribution is deemed
to have come ratably from all of them.
 

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