[b][u]The Facts[/u][/b]:

In 2009 client, age 46, had a $70,000 Traditional IRA which contained a large portion of non-deductible Traditional IRA contributions. Client also had a $250,000 Simple IRA. In 2009 client transferred the Simple IRA proceeds to their Traditional IRA so that now only a single Traditional IRA exists of about $320,000. Client now wants to consider converting a portion of their Traditional IRA to a Roth IRA in either the remaining days of 2009 or 2010.

[u][b]The Problem[/b][/u]:
More specifically, if the client could do it over, they would have converted all or a portion of the $70,000 Traditional IRA to a Roth IRA in 2009 BEFORE the proceeds of the Simple IRA were transferred to the Traditional IRA. The reason for this is that the tax burden would be less since the $70,000 contained the substantial portion of non-deductible IRA contributions. So if the conversion is made now, the exclusion formula will yield a much smaller non-taxable portion of the IRA distribution (since none of the Simple IRA money has [i]any[/i] non-deductible contributions).

[u][b]The Question[/b][/u]:

Can the client [b]SEND BACK[/b] (via IRA transfer) to a Simple IRA (similiar to a recharacterization) the $250,000 that was originally transferred [b]in[/b] to the Traditional IRA in 2009(from the Simple IRA), and then, once done, convert the $70,000 Traditional IRA to a Roth IRA? The goal is to have the highest part of the IRA distribution excluded from taxation because of the exclusion formula.

If the answer is YES, does this have to be done before 12-31-2009?

Thanks for taking the time to consider this question.