"Leftover" IRA Basis

[Bill Woessner]

This is something I probably should have noticed last year, but
didn't. Since ~2007, I have made non-deductible IRA contributions.
In 2010, when the income limit for converting to Roth was lifted, I
converted my traditional IRA to Roth. I just finished up my 2011
taxes and I noticed something strange. On form 8606 (line 14), I have
a non-zero basis for my traditional IRA, even though I don't have a
traditional IRA any more.

My best guess is this means I had a loss when I converted my
traditional IRA. In fact, TurboTax put that loss on my schedule A,
but it does not exceed 2% of my AGI, so I didn't get a deduction.

Is there anything I can do with this? Any benefit I can realize?
I've already made a non-deductible IRA contribution for 2012 (and
immediate converted it to Roth). But if there's something else I can
do with this "leftover" basis, either this year or next, please let me
know.

Thanks in advance,
Bill

[Rich Carreiro]

Bill Woessner <woes...@gmail.com> writes:

> My best guess is this means I had a loss when I converted my
> traditional IRA.

That's exactly it. Your total distributions from all your
trad IRA accounts was less than the non-deductible contributions
you made.

> In fact, TurboTax put that loss on my schedule A,
> but it does not exceed 2% of my AGI, so I didn't get a deduction.

Correct on both counts.

> Is there anything I can do with this? Any benefit I can realize?

I believe the loss is lost -- it doesn't carry over.
The misc deduction subject to the 2% of AGI haircut
was created when your trad IRA balance went to zero.
That your AGI was too high for you to benefit from it
is too bad. You don't get to claim it in 2012 (or later).
It was a 2011 deduction, I believe

But check IRS Pub 590 to be sure.

--
Rich Carreiro rlc-...@rlcarr.com

[Bill Woessner]

I've been thinking more about my "leftover" IRA basis. My current "leftover" basis is about $1k and I have no traditional IRA holdings. What if I made a $5k non-deductible IRA contribution, waited until it appreciated to $6k and then converted it to Roth. Other than the fact that it may take forever to get the 20% appreciation, are there any problems with this plan? It seems to me that this is a way of recapturing the "leftover" basis.

Thanks,
Bill