Roth recharacterization
Roth conversion took place in 2010. Due to decline in the stock market, Roth will be recharacterized by 10/17/11. Another Roth conversion took place January 2011. If we wait the 30 days after the recharacterization, can we do another Roth conversion (November 2011) even though we already did one in January 2011?
Permalink Submitted by Alan Spross on Wed, 2011-10-05 21:21
Yes, you can do the reconversion after the 30 day waiting period. The taxable income for 2011 will be affected by the Jan conversion as well as the next conversion.
Better move quickly on the recharacterization since there are only a few business days left and activity will be heavy.
Permalink Submitted by Lee Martinson on Wed, 2011-10-05 21:44
I assume that he can do the reconversion this year only if it is the money from the 2010 conversion and not from the Jan 2011 conversion because you cannot reconvert in the same year or within 30 days of recharacterization.
Lee
Permalink Submitted by Alan Spross on Wed, 2011-10-05 23:08
Yes, he can reconvert only the 2010 recharacterized conversion, or he can convert new money that had not been converted in either year. If the Jan 2011 conversion is recharacterized in addition to the 2010 conversion, it should be transferred to a new TIRA account and not reconverted, as that will help prove to the IRS that any additional conversions did not come from recharacterized 2011 conversion assets.
The addtional account is not essential because the IRS does not sniff out disallowed reconversions, but in the unlikely event things change this is an easy way to show the IRS that no disallowed reconversion took place.