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Mar 12 2012 12:00AM

Question


My wife converted her traditional Individual Retirement Account (IRA) to a Roth IRA in early 2010, to be split in 2011 and 2012. Unfortunately, she died of breast cancer in 2010. I inherited her Roth IRA. Do I have to pay the tax on the conversion?

Answer

“First let me offer my condolences on your wife’s passing,” said FPA member Gail Fialkow, CFP®. “You have so much to deal with and then to have this confusing issue must be quite frustrating. The answer to your question is 'yes,' you must pay tax on the conversion on your tax return.

“Since your late wife elected to pay the tax in 2011 and 2012, you can take over that election or you may pay all the tax on your 2011 return. You should select the way that allows you to pay the lowest tax on the conversion. It would probably be the two year tax election unless you expect a very high taxable income in 2012 compared to 2011. Please go slow during this period as it is a difficult one.”

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