Chris,

Client cannot recharacterize any part of a 2010 conversion after 10/17/2011. The deferral of income reporting does NOT result in any extension of the recharacterization deadline. But let’s assume he recharacterizes half his conversion in 2011 prior to 10/17/2011. At the end of 2010, he will have had no TIRA balance because the entire amount had been converted. But when he recharacterizes half, the amount that migrates back to the TIRA including the earnings allocation that goes with it is deemed to have existed in the TIRA on 12/31/2010 and will result in an RMD obligation based on that amount for 2011.

Of course, the client must take his 2010 RMD prior to doing the 2010 conversion.

The main issue above is covered in Pub 590, p 34, “Outstanding rollovers and recharacterizations”.

I suppose in many cases, the recharacterized conversion will result in a small reduction in the RMD because most people will recharacterize due to a loss of value in the Roth. So if the earnings allocation is negative due to losses in 2011, the amount migrating back to the TIRA will be less than the conversion, and the reinstated RMD will be calculated on a lower amount than would have existed without the conversion.

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