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Old 03-02-2009, 11:34 AM
 
Location: So Cal 4 now
23 posts, read 84,323 times
Reputation: 18

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Because of the free fall of property values where I live, I have been buying rental property in my self directed SEP-IRA. By the end of the year I hope to have 8 free/clear rentals in the account. I have heard that in 2010 I can roll this account into a Roth. I have not been able to do so because of the income limits. The account will have a total balance of about 700k. I also heard that the taxes can be paid over several years. Any body heard of this?

The properties generate 1200-1500 month each. I am turning 50 this year and think that in the long run, I'll be better of with a Roth considering rents and eventual appreciation.

BTW, these properties sold at the peak around 300k and are now under 90k!
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Old 03-02-2009, 02:02 PM
 
Location: The Pacific NW.
879 posts, read 1,737,223 times
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Yes, beginning in 2010, there are no income limits on Roth conversions. And if you convert in 2010, you can spread the tax out over 2 years (2011 & 2012). If you convert after 2010, you owe tax on the entire amount again.
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Old 03-03-2009, 10:11 AM
 
1,403 posts, read 3,055,137 times
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Quote:
Originally Posted by LongArm View Post
Yes, beginning in 2010, there are no income limits on Roth conversions. And if you convert in 2010, you can spread the tax out over 2 years (2011 & 2012). If you convert after 2010, you owe tax on the entire amount again.

Are you sure about owing taxes on the entire amount? I thought it was only earnings since they accumulated tax-free....
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Old 03-03-2009, 12:15 PM
 
Location: The Pacific NW.
879 posts, read 1,737,223 times
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Quote:
Originally Posted by broadbill View Post
Are you sure about owing taxes on the entire amount? I thought it was only earnings since they accumulated tax-free....
I'm talking about tax on the CONVERSION from a deductible IRA to a Roth. Tax has never been paid on money in a deductible IRA (principal OR gains), so any amount converted to a Roth will be taxable. AFTER the conversion, yes, all gains in a Roth are tax-free.
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