I just converted some money in a SEP-IRA to a Roth IRA. The value of the fund that money was invested in was down about 10% from when I initially invested in the SEP-IRA. Once the transaction was completed, I was surprised to see my account custodian listing the Roth IRA cost basis as the original investment amount into the SEP-IRA, rather the value of the fund at conversion (again, about 10% less than the original investment amount).
- Why is the cost basis of the Roth based on the original SEP-IRA investment amount rather than the value of the investment at conversion?
- Does the value of the cost basis affect the taxes of the conversion at all? Or are the taxes based solely on the value of the investment at the time of the conversion?