ZERO Value Roth Conversion
Client had a stock in his account that was at ZERO during 2016 and he converted it to a roth, with the hope the stock might eventually have value. If the IRA Custodian does not issue a 1099 because the distribution due to the conversion was ZERO, what should the client do for tax reporting? Won’t IRS want to know how the money ended up in the roth? Will no 1099 to match up with the 5498, etc raise a flag? I guess it’s possible the 5498 for the roth won’t show anything either regarding the incoming conversion if the amount was zero. Has anyone seen or dealt with this before?
Permalink Submitted by Alan - IRA critic on Wed, 2017-02-01 23:27
There will not be a 5498 unless the Roth custodian has a different opinion of the value of these shares. The IRS is also used to situations where the 1099R and 5498 do not match up exactly, so are likely to ignore a situation where the dollar difference between the forms or lack of one of the forms is small. The client will not know about the 5498 unless the return is extended but can check the Roth statement to determine the amount added to the account. If concerned client can always add an explanatory statement to the return.