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Posted by krearden on January 24, 2008, 9:46 pm
Please log in for more thread options > > Say you put $4000 in Roth IRA.
> > But later on you had to transfer it back into a traditional
> > IRA along with its fraction of earnings - say a $4500
> > transfer. So should the the $500 earnings then be
> > taxed and the whole $4500 added to the IRA basis?
> > What IRS form is filed for this?
>
> When you recharacterize an annual contribution, it is treated as if
> the contribution were made originally to the IRA it was
> recharacterized into.
>
> So in your example, the recharacterization means the ultimate outcome
> is the same (for tax purposes) as if you put the $4000 in the trad IRA
> in the first place. So the $500 is NOT taxed (because in theory you
> would have made that same $500 within the trad IRA if the contribution
> went to the trad IRA in the first place).
>
> There's no IRS form to report this on (unless the recharacterized
> contribution to the trad IRA is not deductible, in which case you'd
> use 8606 to report the non-ded contribution, same as if you had made
> a non-ded trad IRA contribution in the first place).
>
> --
> Rich Carreiro rlc-n...@rlcarr.com
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
> << >>
> << The Charter and the Guidelines for submitting posts >>
> << to this newsgroup as well as our anti-spamming policy >>
> << are atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
Informative answer! I have a similar question and here are the
details:
I contributed $8000 to my Roth IRA last year on the same day (before
April 15th): $4000 for 2006 and $4000 for 2007.
My 2007 modified adjusted gross income exceeded the limit to be
eligible to contribute to the Roth IRA for 2007.
My Roth IRA lost money this year - went from a market value of $8000
to a market value of $7500.
What now?
Here are the options I have investigated with financial professionals:
1. Recharacterize my account for the money put in for 2007 from a Roth
IRA to a Traditional IRA
2. Take out the $4000 I invested for 2007 with no tax penalty (because
I lost money and I already paid taxes on the $4000 I originally put
in).
Any comments?
Thanks
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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