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Can an Inherited IRA Get a Roth Rollover?

Posted 9/14/20

Q.: I have inherited a $45,000 IRA from my uncle. I would like to convert this inheritance to a Roth IRA. My CPA told me this is permitted, while my insurance agent says it cannot be rolled over to a Roth IRA. I value your opinion. S.P.

A.: The inheritance must be rolled into an IRA. It may not be converted to a Roth IRA, even though you are willing to pay the tax. If, however, the inheritance came from an employer-retirement plan like a 457(b), 401(k) or 403(b), you would be allowed to roll over the $45,000 to an IRA and defer the tax or convert the $45,000 to a Roth IRA and pay the tax. This is one case where the taxpayer is willing to pay the tax but the IRS says no thank you. Yes, this is peculiar but it's the tax law. Apparently, the lawmakers wanted to be more flexible when the source of the inheritance was an employer-plan account.

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