Recouping nondeductible contributions to traditional IRAs.(Individual Retirement Accounts)

Tax Adviser, The,  November, 2006  by Ellentuck, Albert B.

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An individual who makes nondeductible contributions to a traditional (versus Roth) IRA acquires basis therein. Thus, a portion of each distribution will be a nontaxable return of basis; see Secs. 72(e) and 408(d). Unfortunately, except for certain rollover situations, a taxpayer cannot withdraw the nondeductible portion (basis) before withdrawing amounts includible in taxable income. Accordingly, each distribution has both a nontaxable and taxable component.

Note: Contributions to a Roth IRA are nondeductible, but earnings build up tax flee; taxpayers can eventually take out ...

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