IRA Rollover

Archive for June, 2010

Question: Need to report rollover from qualified plan other than on line 16a?

I received a 1099-R regarding a rollover from a qualified plan to a Traditional IRA. I have duly reported it on Line 16a of my 1040. My question is, do I adjust my basis in my Trad IRA for this amount, on my Form 8606? I have been filing a Form 8606 for three years now, since my Trad IRA contributions are non-deductible, and it is showing a cumulative basis each year. Is the rollover from the qualified plan irrelevant to the basis/Form 8606 calculation? (It would make sense since the qualified plan was pre-tax and all my Trad IRA have been post-tax and non-deductible….Ultimately, I am wondering how the IRS will sort it all out once I start taking actual distributions from this IRA but for now I need to know if it is just reported on line 16a.)

THANKS!

Answer: I researched this to try to get you a resource, but it really depends on the type of plan rolled over. The first link below is the instructions for form 8606, and the second link is the specific part that talks about how to treat rollovers.
I read it and it appears you need to treat the rollovers as a recharictarization and include it in the basis. Really, it just makes sense. You had a pretax plan, you’re rolling it over to an after tax plan and paying tax on it. That just adds to the basis.

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