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are not present here. For an individual taxpayer, AGI is gross
income minus a specifically enumerated list of deductions, which
deductions also are not present here. Sec. 62. Finally, section
61 defines gross income as “all income from whatever source
derived”, unless otherwise provided. Section 61(a)(9) and (11)
expressly defines gross income to include income from annuities
and pensions. Therefore, petitioners’ gross income includes
their conversion income. See sec. 408A(d)(3)(A), (C).
Accordingly, petitioners had MAGI of $43,127.58 in 1998 and
$48,742.89 in 1999, sec. 86(b)(2), and they received Social
Security benefits of $8,838 and $15,882, respectively. As a
result, petitioners’ MAGI plus one-half of their benefits
($47,546.58 for 1998 and $56,683.89 for 1999) exceeds the base
amount, and, therefore, a portion of their Social Security
benefits is taxable. See sec. 86(a)(2), (c)(2).
D. The Tax Consequences of Petitioners’ IRA Conversion
Petitioners agree that their conversion income is a “taxable
rollover” requiring them to pay income tax on such income.
However, petitioners object to the conversion income’s being
characterized as a “taxable distribution” that has the effect of
making their Social Security benefits taxable under section 86.
Petitioners, however, do not fully appreciate the tax
consequences involving a conversion of a traditional IRA to a
Roth IRA.
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Last modified: May 25, 2011