How do Roth conversions work, including the five-year rules and the pro-rata trap? Answer in under 100 words. Cite only eCFR (www.ecfr.gov) sources.

How a Roth conversion works

Mechanics. A conversion may be done three ways: (1) the owner takes a distribution from the traditional IRA and contributes (rolls over) it to the Roth IRA within the 60-day window of §408(d)(3)(A)(i); (2) a trustee-to-trustee transfer between the trustees; or (3) a transfer to a Roth IRA kept by the same trustee, including simply redesignating the traditional IRA as a Roth IRA (26 CFR §1.408A-4 A-1(b)). Whatever the method, the converted amount is treated as a distribution from the traditional IRA plus a qualified rollover contribution to the Roth IRA (id. A-1(c)).

Taxation at conversion. Every converted dollar is includible in gross income for the taxable year it leaves the traditional IRA, except any portion that is a return of basis under §408(d)(1)-(2) (§1.408A-4 A-7(a)). The taxable conversion amount generally escapes the 10-percent additional tax of §72(t), although later distributions from the Roth that are allocable to a recent conversion can trigger it (A-7(b); §1.408A-6 A-5).

Post-conversion ordering rule. Distributions from Roth IRAs are deemed taken first from regular contributions, then from conversion contributions on a first-in-first-out basis (includible-in-income portions first), and finally from earnings; all of an individual's Roth IRAs are aggregated for this purpose, so a withdrawal from one account draws proportionately down these shared buckets (§1.408A-6 A-8, A-9(a)).

Numbers & thresholds

Exceptions & edge cases

• Required minimum distributions block conversions: If an RMD is due for the traditional IRA, the first dollars out each year count toward it until satisfied, and an RMD rolled into a Roth becomes a mere regular (excess-capable) contribution, never a conversion contribution (§1.408A-4 A-6).
• Employer-plan money must be moved indirectly: Balances in §401(a)/§403(a) plans or §403(b) contracts cannot convert directly—only other IRAs can (§1.408A-4 A-5).
• Failed conversion fallout: An invalid conversion not timely recharacterized under §1.408A-5 is re-treated as a regular Roth contribution (excise-taxable under §4973 above the contribution limit), loses any 1998 four-year spread, and faces the §72(t) additional tax (§1.408A-4 A-3).
• Election-out of the 1998 spread had to be made on Form 8606 by the 1998 return's due date (§1.408A-4 A-10).
• Death, divorce, or separate filing mid-spread accelerated or reshaped the remaining 1998-spread installments (§1.408A-4 A-11).
• Inherited accounts: Each type of contribution passes to multiple beneficiaries pro rata, and a beneficiary's inherited Roth cannot be aggregated with the beneficiary's own IRAs (spouse electing ownership excepted) (§1.408A-6 A-11).

Scope note: These sections explain that basis recovered under §408(d)(1)-(2) shrinks the taxable conversion amount (§1.408A-4 A-7(a)) but do not spell out the cross-account traditional-IRA allocation mechanics popularly labeled the "backdoor-Roth pro-rata trap"; consult the full §408(d) and Form 8606 instructions for that computation.