Roth IRA taxes

From: Jason Kaufman <JHK@copper-mt.com>
Subject: Roth IRA taxes
Date: Tue, 24 Mar 1998 18:45:46 -0500 (EST)

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I am reading conflicting information as to the possibility of using a
portion of the proceeds from an old Non Taxed IRA to pay the tax due
after the conversion. I read that it can be done with little or no penalty
vs: double penalty if done. Allow me to pose a scenario:

Existing IRA value $100K, owner over the age of 59 1/2, current tax
bracket (for discussion) 20%

Transfer ALL of the IRA to a New Roth IRA in 1998.

Tax due ( payable over 4 years ) $20,000 ( @ $5,000 per year )

	=> Actually, I believe that this 100K is added on to your
existing income (at $25,000 a year) so if that puts you in a higher
bracket then the taxes due would be higher.

Since the money in the Roth Ira is "after tax money", withdraw 4/1/99,
penalty free (FIFO) $5,000

Send $5,000 to IRS.

(Roth IRA should have earned more than 5% for the year, so you should
have
more than $100K)

Repeat for next three years

Does anyone see any problem with this scenario?????

	Yes, I see a problem.  Just because a Roth is after tax money,
you still must leave the money in for 5 years before making a withdrawal
that is tax free.  The IRS is kind, but not as kind as you think.


Jason H. Kaufman
Copper Mountain Trust Corporation
Corporate Web site:  http://www.copper-mt.com

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