I:18-27 Roth Versus Traditional IRA Decision. Your client has a traditional deductible IRA to which he has deducted all contributions. Thus, the IRA has zero basis (Bk = 0). The client is considering converting to a Roth IRA with the conversion tax to be paid from an outside currently taxable source. In any case, the client intends to cash out of the IRA in n years with no early withdrawal penalty. Using the traditional IRA retention versus Roth conversion models, derive a general formula to help the client determine how high a future tax rate (tn) must be to cause the Roth conversion to be preferable to retaining the traditional IRA. That is, derive a formula indicating that a Roth conversion is better when:

tn > 3right hand side of formula4 The client has not yet determined the value of any variables (except Bk = 0) and just wants as simple a general formula as possible in which the client later can insert actual values.