Backdoor Roth with Pre-existing IRA

[slowplod]

I rolled over some old employer funds into a Vanguard IRA before I knew about the Backdoor Roth.  My understanding is that I will pay income tax on the cost basis of the overall IRA, which would be quite a lot of gains.

Can I get around the cost basis of my previous IRA investments if I open up a Fidelity IRA and convert to the Roth using that fund?

[ixtap]

The compact that holds your funds don't matter. Are you saying that you currently have a traditional IRA consisting of tax deferred contributions plus gains?

If so, you will need to pay taxes on the whole amount in order to convert to a Roth IRA.

Or, is does your existing IRA consist of after tax contributions plus gains? In that case, it is a bit more complicated because you need to know the original contributions.

[slowplod]

The compact that holds your funds don't matter. Are you saying that you currently have a traditional IRA consisting of tax deferred contributions plus gains?

If so, you will need to pay taxes on the whole amount in order to convert to a Roth IRA.

Or, is does your existing IRA consist of after tax contributions plus gains? In that case, it is a bit more complicated because you need to know the original contributions.

The IRA currently is a rolled-over 401k, so contributions are pre-tax plus gains.

What I want to do is contribute 5,500 post tax into an IRA, then convert the funds into a Roth.  Basically, I'm wondering if I have a separate IRA, with separate funds, can I pay taxes only on the gains that the $5,500 is associated with.

Example:
I have $100k in pretax IRA invested in Vanguard Total Stock Market fund (VTSMX)
I contribute $5,500 post tax into an IRA Fidelity Total Stock Market Fund (FSTMX)

What's my tax basis for converting the $5,500 into a Roth?  My Tax basis on the $100K is $0 because I've never paid taxes on that money.  But the $5,500 was taxed - if I keep these funds/custodians separate, is my tax basis $5,500, or is it still 0?

[Systems101]

Where the IRA is located doesn't matter, all of your traditional IRAs are pooled for purposes of cost basis accounting, so your basis is neither $5,500 nor zero (it's a ratio).  See #1: http://ibd.morningstar.com/article/article.asp?id=547153&CN=brf295,http://ibd.morningstar.com/archive/archive.asp?inputs=days=14;frmtId=12,%20brf295

Do you have a current 401(k) that will accept IRA funds?  If you do, you can roll the traditional IRA into your current 401(k) and thus remove any challenges of having a traditional IRA.