Question

The transfer of funds from a traditional IRA to a Roth IRA is called a(n) (1).

a) Rollover
b) Conversion
c) Distribution
d) Contribution

Answer 1

The transfer of funds from a traditional IRA to a Roth IRA is called a conversion. This process involves moving funds from a tax-deferred account (traditional IRA) to a post-tax account (Roth IRA). The funds in the traditional IRA are subject to income taxes at the time of conversion.

Step-by-step explanation:

The transfer of funds from a traditional IRA to a Roth IRA is called a conversion. This process involves moving funds from a tax-deferred account (traditional IRA) to a post-tax account (Roth IRA). The funds in the traditional IRA are subject to income taxes at the time of conversion.The transfer of funds from a traditional IRA to a Roth IRA is known as a conversion. The traditional IRA is a tax-deferred account where you pay taxes on the lump sum upon withdrawal, whereas a Roth IRA involves contributions with after-tax dollars and allows for tax-free withdrawals in retirement. This process involves converting the pre-taxed dollars in a traditional IRA into the after-tax framework of a Roth IRA, which may involve paying taxes on the converted amount at your current income tax rate