Mega Backdoor Roth: Will My IRA Rollover Be Taxed? Will the Step Transaction Doctrine Apply?

by Retirement Advisor | Sep 19, 2022 | Rollover IRA

Question: Yuan, IL – Hi Al and Joe, love your show! It is entertaining and educational all at once. I learned a lot. Thank you! I have a couple of questions about rollover of after-tax 401k to IRAs.
Background info:
Have Roth IRA and Traditional IRA. Traditional IRA has $0 balance.
401k plan at work:
Pre-Tax 401k
Roth 401k
After-Tax 401k – $20K contribution, $50K gain. Can no longer contribute to this.
What I would like to do:
Rollover the $20K non-taxable contribution to Roth IRA, and the $50K taxable gain to IRA
Rollover the IRA back into my pre-tax 401k before the year-end. This is because I did the back-door Roth conversion in January 2022.
My 401k plan allows the above in-service rollover. My questions:
Will it result in any tax?
Should I be concerned with Step Transaction Doctrine?
Looking forward to listening to you on the podcast. Thank you for your advice in advance.

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