IRA Conversion to Roth IRA and invest into Oil/Gas LP in 2010
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Does anyone have an answer for if you convert an IRA to a Roth IRA in 2010 and use the monies to invest in an Oil/Gas LP can the person who converted from an IRA to a Roth IRA use the IDC expense in the year it occurred against ordinary income on the current year tax return which would offset most if not all the tax owed on the IRA conversion. I would think once you convert the IRA to an Roth IRA when you get a K-1 from the Oil/Gas LP it will be in the name of the Roth IRA entity and you would not be able to deduct the IDC expenses in the current year against ordinary income.
Anyone have a thought on this?
Thanks
Answer
Of course not. The IRA, whether Roth or traditional, is a separate entity. It can't just pass out its tax attributes like candy at a birthday party.
I think an Oil & Gas deal is about the worst possible investment for an IRA. IDC's, 179 depreciation, 15% statutory depletion -- all will be lost if it's owned by the IRA. Put personal money into tax-favored deals like the O&G LP, and invest IRA funds in portfolio income-producing assets. Traditional IRA's have their good points, but they are also very efficient at converting long-term capital gains into ordinary income.
Inside of a dog, it's too dark to read.
~Groucho Marx
