Questions and Answers

Conversions are taxable in the year of the distribution from the traditional IRA. The deadline for a conversion is December 31 for a calendar-year taxpayer. Conversions prior to age 59½ are not subject to the 10 percent penalty tax. However, a five-year holding period applies to converted assets if the IRA owner is younger than age 59½. If a Roth IRA owner takes converted assets from his/her Roth IRA before the end of the five-year period, he/she will be subject to the 10 percent penalty tax unless an exception under Internal Revenue Code Section 72(t) applies.