jesdq1
Level 4

I did not ask this question very clearly. Let me try again.  Client rolled over all of his Traditional IRAs into Employer 401K.  Then, opened a Non Deductible Traditional IRA, and immediately converted to a Roth IRA from the 401K. Conversion did not come from "new" money. The 401k contains all pre tax dollars with no basis. It is my understanding that the pro-rata rules (and Notice 2014-54) also apply to the 401k with a slightly different allocation method.  Since there is no basis in the 401k, the converted amount is taxable. The rollover of the IRA (done to try to escape the pro rata rules) did not help save any tax in this situation. If the client had for example $5,000 of post tax in the 401K, $5,000 escapes tax.   Am I correct?  Thank you for your help and patience. 

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