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The IRS used our conversion of our IRA’s from
traditional to Roth as an excuse to cause our Social
Security Benefits to become taxable that would not have
otherwise been taxable. This was not the intent of the
Roth IRA law.
Petitioners expanded on their contention at trial as follows:
IRS * * * used the words “rollover” and “distribution”
interchangeably, sometimes in the same sentence, which
from the point of view of taxing the IRA rollover,
doesn’t really matter.
When you go on next step down the line, and you’re
considering it as income, the rollover doesn’t create
income. A distribution would create income, but a
rollover doesn’t. You don’t get any money. And from a
simplistic point of view, there’s the difference
between not getting money and getting money.
When the law was passed with reference to taxability of
Social Security benefits, they referred to income. And
I think they meant actual income. Money that you got,
not a mythical amount of money that you didn’t get.
* * * * * * *
There is a big difference between getting money and not
getting money. And I don’t think my Social Security
benefits should be taxed based on money I didn’t get.
* * * Yes, as far as taxing the rollover, it is a
taxable rollover. But it is not a distribution.
Now, the fact that Form 8606 said to report this on
[Form 1040] line 15b [taxable amount of IRA
distribution] is their directions. We ended up
reporting a rollover on a line that is specifically for
distributions. That creates an error, because there is
nothing in the Code to exclude anything on line 15b
when it comes to calculating taxability of Social
Security benefits.
* * * * * * *
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Last modified: May 25, 2011