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As stated above, a conversion from a traditional IRA to a
new Roth IRA is a taxable recognition event such that the
rollover distribution is included in gross income for all tax
purposes, unless otherwise specifically provided, whether or not
petitioners actually receive money. Furthermore, neither section
408A nor section 86 specifically excludes conversion income in
the calculation of gross income for purposes of Social Security
benefits. At trial, petitioners also specifically acknowledged
the absence of any provision shielding Social Security benefits
from the tax consequences of a conversion from a traditional IRA
to a Roth IRA. Accordingly, we have no basis to carve out such
an exclusion.
E. Conclusion
We hold that petitioners’ conversion income is included as
an item of income for purposes of calculating the taxability of
their Social Security benefits. In view of the foregoing, we
sustain respondent’s determination on the disputed issue.
We have considered all of the other arguments made by
petitioners, and, to the extent that we have not specifically
addressed them, we conclude they are without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
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