Abstract: A traditional IRA is first used to purchase an annuity, and then some months later, the traditional IRA is converted into a Roth IRA. Because of the penalty associated with the surrender of the annuity, the fair market value of the annuity transferred to the Roth IRA is discounted from the face value of the annuity, thus decreasing the federal income tax payable as a result of converting the traditional IRA to a Roth IRA. This method of doing business also contemplates the use of other assets similar in some ways to an annuity, such as long term real estate partnerships, that feature a long term surrender period, and an initial surrender penalty.