Traditional IRA to ROTH IRA
– I’m going to split one stock holding (say 5000 shares) and convert it in kind (worth say about $500,000, at current market value of $100 per share at time of conversion). I would like to open and split into 5 separate ROTH IRA of 1000 shares each worth ~$100,000. This would allow me to recharacterize any one or all ROTH back to a traditional IRA.
Question: If the equity or my tax bracket do not go as forecasted, can I convert back (recharacterize) all or only some of these separate accounts back into a traditional IRA? Do they have to go back to the same IRA they came from, or can I – or have to – recharacterize them into one or more new traditional IRA. This is important, as that in some of the converted to ROTH accounts, I may sell call options, and that would complicate the recharacterization if pooled into a single ROTH IRA.
Question: If I do it in multiple IRA to ROTH, does that avoid the once per year rule? I asssume not, since the conversions will be done by the IRA/ROTH trustee. No check, or stock certificates will come through my hands.
Permalink Submitted by Alan - IRA critic on Tue, 2014-12-09 17:05
There are no limitations on the number of conversions or recharacterizations you can do. The one rollover rule does not apply to either, even if you get a distribution and convert it yourself. You can also recharacterize all or part of each conversion and on different dates. Be sure to maintain proper diversification overall since holding more than 10% or so in one stock can be very risky. You can always sell the shares in your Roth for that purpose. Just because you converted a specific holding does not mean that you could not sell it and repurchase another in your Roth and still recharacterize if you wish. Recharacterizations usually go back to the original TIRA account, but they do not have to. You might have closed or transferred the original account, and then you would have to recharacterize to a different TIRA account.