Comingling pre-/post-tax contributions in IRAs?

I hope I have a reputation for 'kind'. Another kind poster set me straight here, when I answer an IRA question. For traditional IRAs, you only have one IRA, whether it's in multiple accounts is a separate issue, and may or may not have other impact (e.g. loans are per account, not totaled across all). Distributions are aggregated across all IRAs, i.e. you must pro-rate pre-tax/ post tax deposits to determine amount taxable. Form 8606 tracks post tax deposits for your IRA accounts. Pretax deposits and all growth is taxable at withdrawal. Conversion to Roths are prorated as are withdrawals. I either covered this completely, or went on too long and confused you.

The separate accounts don't help because all the growth is taxable anyway. It's form 8606 that tracks post tax deposits. (that was the simpler answer).

JOE

Just one kind correction in what Joe said: You can't use your IRA as collateral for a loan; doing so causes the loan amount to be considered a distribution.

Dave

Dave - can't one borrow money from a given account for up to 60 days? My choice of words was poor, maybe I should have avoided the word 'loan'? I was just trying to make the point that in this case multiple accounts are treated differently than the single account holding the entire IRA balance. Each account has its own 60 day rule. JOE

Well, that wouldn't be a loan. You can take a distribution, and then have 60 days to complete a rollover. I do not know if you can put the money back in the same fund, or if you have to transfer it to a different custodian (e.g., out of Vanguard, into Fidelity). Do you, Joe?

Dave

I have always understood you are permitted to return it to the same account. I'm sorry I refered to this at all, the OP's question had nothing to do with this, and, eliminating the loan referrence, my answer would have been pretty complete. Other sources call it a 'loan', but they are using the term very loosely, as the IRS is clear that one's IRA cannot be pledged as a collateral for a loan. Perhaps 'borrow from your own account' is better phrasing. This was discussed in a thread about a month back, think we concluded same account is ok, there. JOE

IRS Pub 590 is clear on returning money to the same account: "You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA."

But I'd be very leery of calling it "borrowing" from one's account. Since it is a withdrawal (distribution) and rollover, this can be done only once per year per IRA. This important restriction is glossed over if one thinks of it as borrowing from oneself.

Mark Freeland snipped-for-privacy@sbcglobal.net