easy · Certified Financial Planner Investment Planning
The Keene household consists of a client with a traditional IRA containing $90,000 of pre-tax contributions and $10,000 of after-tax basis. The client wishes to convert only the $10,000 after-tax portion to a Roth IRA.
What is the tax consequence of this conversion?
- 90% of the conversion amount is taxable as ordinary income
- The entire $10,000 is taxable at long-term capital gains rates
- 10% of the conversion is taxable
- The conversion is entirely tax-free since it only uses after-tax money
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