jesdq1
Level 4

Thank You. I guess I am not making myself clear and I am not understanding (sorry it has been a long challenging tax year).  Their were two events, one being the Reverse Rollover and the second event was the non deductible IRA back door.  I agree the first event is non taxable. I am having a hard time understanding why the second event is not taxable. Yes, the client does not have an existing Traditional  IRA, Simple IRA or SEP. But, the dollars used to fund the non deductible IRA came from a 401k that has zero basis.  Help me understand how the rollover transforms tax deferred into no tax deferred or no basis. 

If an IRA existed at the time of the back door we must use an allocation method to arrive at the taxable amount. So, why do we not have to use an allocation method for the back door from a 401k?   Your help is greatly appreciated.  

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