I contributed $4,000 towards my traditional IRA early in 2013, but later on I took out a distribution of $8,000 from this account. I know I need to pay tax on the $8,000 distribution. I also opened a ROTH IRA account last week which is not funded yet. My question is two-fold:
1. Do I show both the $4,000 contribution as a deduction from my 2013 AGI, and $8,000 taxable withdrawal, or just a net $4,000 withdrawal.
2. Since I have already taken out more that I contributed to my regular IRA this year, can I contribute the fully allowed $6,500 contribution to my Roth IRA account in 2013, while paying tax on the net withdrawal of $4,000 from my regular IRA.
1. Do I show both the $4,000 contribution as a deduction from my 2013 AGI, and $8,000 taxable withdrawal, or just a net $4,000 withdrawal.
2. Since I have already taken out more that I contributed to my regular IRA this year, can I contribute the fully allowed $6,500 contribution to my Roth IRA account in 2013, while paying tax on the net withdrawal of $4,000 from my regular IRA.
Answer:-
#1; As you received a distribution in 2013 from a traditional IRA and you also made contributions to a traditional IRA for 2013 that may not be fully deductible because of the income. limits. Then you can figure the amount of nondeductible contributions to report on Form 8606. Follow the instruc-tions under Reporting your nontaxable distribution on Form 8606, next, to figure your remaining basis after the distribution.you need to report your nontaxable distribution on Form 8606. To report your nontaxable distribution and to figure the remaining basis in your traditional IRA after distributions, you must complete Worksheet 1-5 before completing Form 8606.
#2;as said above, I t depends on the amount of non-taxable contribution; you contribute to an IRA or ROTH IRA $5,500 for those age 49 and under $6,500 for those age 50 and older for the 2013 calendar year.
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