ROTH IRA Conversion Opportunities During the COVID-19 Disaster
Given the fact that some investments may have declined in values as a result of COVID-19 and recent economic news, an individual taxpayer may want to consider converting a traditional individual retirement account (“IRA”) into a ROTH IRA. A conversion results in current taxation of any earnings/appreciation as ordinary income. A taxpayer may convert a portion or all of one or multiple accounts, but only a pro rata portion of the basis may be attributed to the amount converted and reduce taxable income accordingly. Thereafter, any earnings/appreciation in a ROTH IRA can be distributed tax-free, and a ROTH IRA is not subject to required minimum distributions as with a traditional IRA.
REF: PHILADELPHIA Estate Planning Council, Vol. XXIX, No. 3, Summer 2020, Considerations for Individuals and Closely Held Business Owners Resulting from the “Cares Act”.
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