The “pro rata rule” is a IRS rule that applies when an investor elects to convert some but not all of their traditional IRA assets to a Roth IRA. When the conversion is not of the entire account the IRS requires that the distribution be treated as if it were coming from both a traditional IRA and a Roth IRA in proportion to the balances of each.
This “pro rata rule” prevents investors from selectively converting only the assets that have increased in value since they were originally deposited in the traditional IRA. It also prevents investors from realizing losses in a traditional IRA and then immediately converting those assets to a Roth IRA.
The “pro rata rule” is generally applied when an investor has both a traditional IRA and a Roth IRA. However it can also apply to conversions of other retirement accounts such as a 401(k) or 403(b).
There are a few exceptions to the “pro rata rule.” One is if the traditional IRA contains nondeductible contributions. Another is if the Roth IRA is a designated beneficiary IRA.
If you have any questions about the “pro rata rule” or how it applies to your situation you should consult a tax advisor.
What is the pro rata rule for roth conversions?
Answer: The pro rata rule requires that you treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the contributions were made.
How does the pro rata rule apply to roth conversions?
Answer: The pro rata rule applies to Roth IRA assets that are converted on the same day.
What is the order in which the pro rata rule applies to roth conversions?
Answer: The pro rata rule applies to Roth IRA assets in the order in which they were converted.
What happens if you have multiple roth iras and you convert assets from one roth ira to another?
Answer: The pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of which Roth IRA the assets were converted from.
What if you have a roth conversion that is not complete on the date you file your taxes?
Answer: The pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed.
What if you have a roth conversion that is not complete on the date you file your taxes and you have multiple roth iras?
Answer: The pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed or which Roth IRA the assets were converted from.
What if you have a roth conversion that is not complete on the date you file your taxes and you have multiple roth iras and you convert assets from one roth ira to another?
Answer: The pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed which Roth IRA the assets were converted from or which Roth IRA the assets were converted to.
Can you avoid the pro rata rule by converting assets from one roth ira to another?
Answer: No the pro rata rule applies regardless of which Roth IRA the assets were converted from.
Can you avoid the pro rata rule by completing a roth conversion after you file your taxes?
Answer: No the pro rata rule applies regardless of when the conversion is actually completed.
Can you avoid the pro rata rule by withdrawing the assets you converted before you file your taxes?
Answer: No the pro rata rule applies regardless of when the conversion is actually completed.
If you have a roth conversion that is not complete on the date you file your taxes and you withdraw the assets you converted before you file your taxes does the pro rata rule still apply?
Answer: Yes the pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed.
If you have a roth conversion that is not complete on the date you file your taxes and you have multiple roth iras and you convert assets from one roth ira to another does the pro rata rule still apply?
Answer: Yes the pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed or which Roth IRA the assets were converted from.
If you have a roth conversion that is not complete on the date you file your taxes and you have multiple roth iras and you withdraw the assets you converted before you file your taxes does the pro rata rule still apply?
Answer: Yes the pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed or which Roth IRA the assets were converted from.
If you convert assets from one roth ira to another and you have a roth conversion that is not complete on the date you file your taxes does the pro rata rule still apply?
Answer: Yes the pro rata rule still applies and you must treat all of your Roth IRA assets as converted on the date of the conversion regardless of when the conversion is actually completed or which Roth IRA the assets were converted to.
Can you avoid the pro rata rule by converting assets from one roth ira to another after you file your taxes?
Answer: No the pro rata rule applies regardless of when the conversion is actually completed.
