Form 8606

Department of the Treasury
Internal Revenue Service (0)

Nondeductible IRA Contributions,
IRA Basis, and Nontaxable IRA Distributions

> Please see Recordkeeping Requirements on back.
> Attach to Form 1040, Form 1040A, or Form 1040NR.

OMB No. 1545-1007

87

Attachment
quence No.

Purpose of Form
The Tax Reform Act of 1986 allows you to
make nondeductible contributions to your
IRA. You may wish to do this, for example, if
all or part of your contributions are no
longer deductible because of the new
income limitations for IRAs

if you choose to make nondeductible
contributions to your IRA, you must report
the amount of the contributions that you
choose to be nondeductible. Line 3 of Form

8606 is used for this purpose. First figure
the amount of your deductible contributions
using the Instructions for Form 1040 or
Form 1040A, whichever applies to you. You
should then report on Form 8606 the
amount you choose to be nondeductible.

When you receive distributions
(withdrawals) from your IRA, the part
attributable to nondeductible contributions
will not be taxable. Form 8606 is used to
figure an amount called “basis" (which

includes the part of your IRA that is from
nondeductible contributions). The form is
also used to figure the nontaxable part of
any distributions you receive. If you
received any distributions in 1987, line 12
will show the amount that is not taxable.

Line 13 of the form reflects the “basis” in
your IRA as of 12/31/87. This amount will
be used on Form 8606 in future years if you
make nondeductible IRA contributions or
receive distributions in those years.

Name (If marned, file a separate Form 8606 for each spouse. See instructions.)

Your social security number

Present home address (number and street) (or P.O. Box number if mail is not delivered to street address)

City, town or post office, state, and ZIP code

1 Enter name of trustee and value of all your IRAs (attach list if more than three)—
Name of trustee (bank, credit union, mutual fund, etc.)

Value on 12/31/87

a la
b 1b
c 1c
2 _ Total value of all IRAs. Add lines 1a through Ic . wee ~[2

3 Enter your IRA contributions for 1987 that you choose to be nondeductible. (Include those made
during 1/1/88-4/15/88 that were for 1987.) (See instructions.) . oe 3

4 Enter only those contributions included on line 3 that were made © during 1/1/e8- 4/15/88. Gee
instructions.). 4

5 Subtract line 4 from line 3 and enter ‘the result (The result may be zero it all of your nondeductible
contributions for 1987 were made in 1988 by 4/15/88. Please continue.) . 5
6 Adjustments. (See instructions.) 6

7 Combine lines 5 and 6 and enter the result. if you did not receive any RA distributions (withdrawals) in
1987, skip lines 8 through 12 and enter the amount (or zero, if applicable) from line 7 online13. . . | 7

8 Enter the value of all your IRAs as of 12/31/87 (from line 2.1 Include any
outstanding rollovers. (See instructions.) . 8
9 Enter total IRA distributions received during 1987. Do not “include
amounts rolled over before 1/1/88. (See instructions.) . . . . . . .L9
10 Add lines 8 and 9 and enter the total. _ aEC) | 7
11 Divide line 7 by line 10 and enter the result as a decimal (to two places) . 41 .
12 Multiply line 9 by the decimal amount on line 11 and enter the result. This is the amount of your
nontaxable distributions for 1987. (See instructions.) . . & {12
13 Subtract line 12 from line 7 and enter the result. This is the basis it in your IRA(S) as sof 12/31/87 . . 113
Under penalties of peryury, | declare that | have examined this form, including accompanying attachments, and to the best of my knowledge and belief, it is true,
Please correct, and complete.
Sign
Here ) Your signature U Date

General Instructions

Paperwork Reduction Act Notice.—We
ask for this information to carry out the
Internal Revenue laws of the United States.
We need it to ensure that taxpayers are
complying with these laws and to allow us to
figure and collect the right amount of tax.
You are required to give us this information.

Who Must File. —You must file Form 8606
for 1987 if you make nondeductible
contributions to your IRA(s). If you and your
spouse each choose to make nondeductible
IRA contributions, you each must file a
Form 8606.

Report your deductible contributions on
Form 1040, Form 1040A, or Form 1040NR
and not on Form 8606

When and Where To File.—Attach Form
8606 to your 1987 Form 1040, Form
1040A, or Form 1040NR.

If you do not have to file an income tax
return because you do not meet the
requirements for filing a return, you still
have to file a Form 8606 with the Internal
Revenue Service at the time and place you
would normally be required to file Form
1040, Form 1040A, or Form 1040NR

Form 8606 (1987)


Form 8606 (1987)

Page 2

Name and Social Security Number. —
Enter your name and social security number
on Form 8606. Your address and signature
are required only if you are not filing Form
8606 with your income tax return (Form
1040, Form 1040A, or Form1040NR).
Note: /f you file a joint return on Form 1040
or Form 1040A, show the name and social
security number of the spouse whose IRA
information is shown.

Recordkeeping Requirements. —To be
able to verify the nontaxable part of
distributions from your IRA, keep a copy of
this form together with copies of the
following forms and records until all
distributions are made from your IRA(s):

@ Forms 1040 (or Forms 1040A or Forms
1040NR) filed for each year you make a
nondeductible contribution;

@ Forms 5498 received each year showing
contributions you made;

e Forms 5498 or similar statements you
received showing the value of your IRA(s)
for each year you received a distribution;
and

Forms 1099-R and W-2P received for
each year you received a distribution.
Additional Information.—For more
information on nondeductible contributions,
get Publication 590, Individual Retirement
Arrangements (IRAs).

Specific Instructions

We have provided instructions for many of
the lines on the form except those that are
self-explanatory.

Line1

Separately list all of your IRAs and their
values at the end of the year, regardless of
whether you make deductible or
nondeductible contributions to them. For
married couples, each spouse must list his
or her own IRA(s) on a separate Form 8606.

lf you have more than three IRAs, list
them ona separate attachment and follow
the format of line 1. Include on line 2 the
total value of all of your IRAs.

You should receive a statement by
February 1, 1988, for each IRA account
showing the value on December 31, 1987.

Line 3

Covered by a Retirement Plan at Work.—
If you were covered by a retirement plan at
work and used Worksheet 2 in the
Instructions for Form 1040 or Form 1040A,
you should enter on line 3 of Form 8606
any nondeductible contributions shown on
line 10 of the worksheet in the Form 1040
Instructions or line 8 of the Form 1040A
Instructions. If you made any nondeductible
contributions to an IRA for your nonworking
spouse, you should complete a separate
Form 8606 for your spouse and enter on
line 3 of your spouse's Form 8606 any
nondeductible contributions for your
nonworking spouse from the appropriate
lines of Worksheet 2.

If you were covered by a retirement plan
at work but you used Worksheet 1 because
your income was $25,000 or less ($40,000
or less if you are married filing a joint
return), follow the instructions below under
“Not Covered by a Retirement Plan at
Work.”

You may also choose to treat any part of
deductible contributions as nondeductible.
To do this, include on line 3 of Form 8606
any deductible contributions that you are
treating as nondeductible.

Note: You cannot take a deduction for any
part of the deductible contributions you are
treating as nondeductible.

If none of your contributions are
deductible and you did not use Worksheet 1
or 2 in the Form 1040 or 1040A
Instructions, you may still choose to make a
nondeductible contribution up toa
maximum of $2,000 (but not more than
your earned income). Enter the amount of
your contributions that you are treating as
nondeductible on line 3 of Form 8606:

If contributions were also made to an IRA
for your nonworking spouse and none of the
contributions are deductible, you may still
make nondeductible contributions up toa
maximum of $2,250 (but not more than
your earned income). Enter on line 3 of your
Form 8606 the total nondeductible
contributions that you are making to your
IRA. Enter the balance on line 3 of your
nonworking spouse's Form 8606. You
cannot make more than $2,000 to either
your or your spouse's IRA. Also, the total of
the two amounts cannot be more than
$2,250 and not more than your earned
income.

Not Covered by a Retirement Plan at
Work.—If you were not covered by a
retirement plan at work or were covered,
but had income of $25,000 or less
($40,000 or less if married filing a joint
return), complete Worksheet 1 in the
Instructions for Form 1040 or Form 1040A.
The amount shown on line 3 of the
worksheet is the amount of your
contributions that you may deduct.
However, you may choose to make all or
part of that amount as nondeductible. Enter
on line 3 of your Form 8606 the difference
between the amount you are deducting and
the amount shown on line 3 of Worksheet 1.

If contributions were made to an IRA for
your nonworking spouse, the amount shown
on line 8 of Worksheet 1 is the amount of
the allowable deduction for your
nonworking spouse's IRA. However, you can
treat all or part of that amount as
nondeductible. Enter on line 3 of your
nonworking spouse's Form 8606 the
difference between the amount that is
deducted for your nonworking spouse and
the amount on line 8 of Worksheet 1.

Line4

lf you made contributions both in 1987 and
1988 that are for 1987, you may choose to
apply the contributions made in 1987 first
to nondeductible contributions and then to
deductible contributions, or vice versa.
However, you may not apply to
nondeductible contributions more than the
amount actually made in 1987.

#U,S. Government Printing Office: 1987-183-423 230916750

For example, assume you make
contributions of $1,000 in 1987, and
$1,000 in 1988. Assume further that
$1,500 of your contributions are deductible
and $500 are nondeductible. You choose
$500 of your contribution in 1987 to be
nondeductible. In this case, the $500 would
be entered on line 3 instead of line 4 and
would become part of your basis for 1987.
Otherwise, the amount would be entered on
line 4.

Line 5

Although the 1987 IRA contributions you
made during 1/1/88-4/15/88 (line 4) can
be treated as nondeductible (for purposes
of line 3), these amounts are not included in
your basis for 1987. This is the reason you
subtract the amount on line 4 from the
amount on line 3. The amount on line 4 will
be included in basis on your 1988 Form
8606.

Line 6

Use this line if you wish to change a
nondeductible contribution made ona
prior-year’s return to a deductible
contribution, or vice versa. For example, if
you were eligible to deduct your IRA
contributions for 1987 but you chose to
treat them as nondeductible when you filed
your 1987 tax return, you can at a later date
change the designation to a deductible
contribution by filing an amended tax return
on Form 1040X, Amended U.S. Individual
Income Tax Return, and show the change in
designation on line 6 of Form 8606.

Line8

Enter on line 8 the total value of all your
IRAs as of December 31, 1987, from line 2.
Include on line 8 any outstanding rollovers.
A rollover is a tax-free distribution from one
IRA which is then contributed to another
IRA. The rollover contribution must be made
within 60 days of receiving the distribution
from the first IRA. An outstanding rollover
is any amount distributed to you from one
IRA within 60 days of the end of 1987
(between November 2 and December 31)
that you did not roll over to another IRA by
December 31, 1987, but that you roll over
to another IRA in 1988 within the normal
60-day rollover period.

Line?

Do not include on line 9 any distributions
that were: (1) received in 1987 that you
rolled over to another IRA by December 31,
1987; (2) outstanding rollovers included on
line 8; (3) contributions under Internal
Revenue Code section 408(d)(4) that were
returned to you before the due date of the
return; or (4) excess contributions made
under Internal Revenue Code section
408(d)(5).

Line 12

The amount shown on this line is your
nontaxable IRA distribution for 1987
Subtract this amount from your total
distributions shown on line 9. The
difference is your taxable distributions to be
reported on Form 1040, line 16b,