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I had to give some of my Roth IRA to my ex-wife, and didn't do it in the wisest manner.

How now do I tell the IRS that only about $80 of the $3,570 that I sent to her are taxable and penalizable gains?

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    I think the IRS assumes that all withdrawals are former contributions, until they are used up, and only then you withdraw gains (that are potentially taxable if you are not old enough, etc). But I don't have a source or time to dig for one right now. – Aganju Jan 18 at 22:22
  • @Aganju according to TurboTax, Roth distributions take a proportion of gains with them. – RonJohn Feb 15 at 13:50
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Typically you'd file Form 8606 with your tax return to determine how much of your distribution is taxable. Specifically, Part III deals with distributions from Roth IRA's. However, the instructions indicate:

Don’t include on line 19 any of the following. .....

Distributions that are incident to divorce. The transfer of part or all of your Roth IRA to your spouse under a divorce or separation agreement isn’t taxable to you or your spouse.

Then again, divorce related transfers shouldn't be reported on a 1099R in the first place, per Form 1099R instructions:

Transfer of an IRA to spouse. If you transfer or re-designate an interest from one spouse's IRA to an IRA for the other spouse under a divorce or separation instrument, the transfer or re-designation as provided under section 408(d)(6) is tax free. Do not report such a transfer on Form 1099-R.

Perhaps that's what you meant by "didn't do it in the wisest manner"? Based on your 1099R, the IRS will expect Form 8606 to accompany, so unless you can get a corrected 1099R I'd imagine you should add Form 8606.

I'm familiar with the Roth IRA distribution side, less so with the twists that divorce adds other than what shows up in the instructions.

  • "Perhaps that's what you meant by "didn't do it in the wisest manner"?" Correct. – RonJohn Jan 19 at 0:55

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