Multiple IRA conversion
If client does Roth IRA Conversion in regular IRA account (one account number), then rolls it over to a fund with multiple IRAs after conversion was previously made… will the client still be able to reverse or redo any conversions during year while any of the funds are down? Does it matter if they were converted in the old fund first before being rolled over? Or does it need to be converted after rolled into account with multiple IRAs? Thank you.
Frank
Permalink Submitted by Alan Spross on Tue, 2010-01-19 23:13
A Roth conversion can always be recharacterized, what varies is the formula used to determine the investment results during the conversion period. This formula dictates the dollar amount that is transferred back to the TIRA at recharacterization.
The earnings calculation must include all the Roth IRA account numbers that held any of each conversion’s dollars prior to recharacterization. These Roth account numbers can hold any number of funds or different investments. All the investments in one of the affected Roth accounts must be figured into the calculation.
A conversion consists of the transfer from each TIRA account number to a Roth IRA account number. If you convert from two TIRA accounts on the same day into the same Roth IRA, you have two conversions because each TIRA account number must issue a separate 1099R reporting the distribution. However, if you take a distribution from just ONE TIRA account and put it in two different Roth IRAs, you have just one conversion and both Roth IRAs must be included in the calculation of the recharacterized amount.
I don’t know that this answers your question. If not, please post an example. Remember that the number of investments in a single Roth account number does not matter. The above rules only apply to actual IRA account numbers.