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ARTICLE · 25 AUGUST 2005

Valuing IRA Annuities in Roth IRA Conversions

Sutherland Asbill & Brennan LLP
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On August 19, 2005, the Treasury issued proposed and temporary regulations governing the valuation of annuity contracts in conversions from traditional IRA’s to Roth IRA’s. Pursuant to Code sections 408(d)(1) and (2), and as provided in Treas. Reg. §1.408A-4, Q&A-7 as adopted in 1999, the amount converted from the traditional IRA is treated as distributed and taxable in the year of conversion

United StatesAccounting and Audit

By George H. Bostick, Adam B. Cohen, Ian A. Herbert, Carol T. McClarnon, Alice Murtos, Robert J. Neis, W. Mark Smith, William J. Walderman, Carol A. Weiser, Brendan M. Wilson and Walter H. Wingfield

Originally published August 22, 2005

On August 19, 2005, the Treasury issued proposed and temporary regulations governing the valuation of annuity contracts in conversions from traditional IRA’s to Roth IRA’s. Pursuant to Code sections 408(d)(1) and (2), and as provided in Treas. Reg. §1.408A-4, Q&A-7 as adopted in 1999, the amount converted from the traditional IRA is treated as distributed and taxable in the year of conversion.

The new temporary regulations, which are effective for any Roth IRA conversion where an annuity contract is deemed distributed on or after August 19, provide that the amount treated as distributed is the fair market value of the annuity contract on the date of conversion, and follow an approach similar to the gift tax regulations in making that valuation:

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