ROTH Conversion timeframe
July and August’s newsletters refer to the timeframe an individual can “re-convert” an initial Trad-IRA / ROTH conversion. I am confused as to the “30 day / calender year whichever comes later” statement. Example: Client converts on March 1st, 2008…..market crahses….client recharacterizes on Sept. 1st, 2008…..client wishes to re-convert………
*** can he re-convert on Oct 2nd ( approx. 32 days after rechar. took place)…..
*** or does he have to wait undtil Jan. 1st 2009 to re-convert.
I would appreciate some clarification……Thank you….JPR
Permalink Submitted by Alan Spross on Mon, 2009-07-27 20:00
Since the next calendar year comes later than 30 days from the date of recharacterization, client cannot reconvert ANY OF THE SAME ASSETS until 2009.
However, the client can still convert DIFFERENT assets without waiting. For example, if client’s original conversion was for 50,000 and there is still a balance in the TIRA after the first conversion, client could convert those other assets whenever he wishes. He could then do the recharacterization of the first conversion and it would be obvious he converted different assets because the second conversion was done while the first was still in the Roth IRA. You just need to be able to establish that you did not reconvert ANY OF THE SAME ASSETS that were recharacterized. If the recharacterization is done prior to the second conversion, it is advisable to have it sent to a new TIRA account such that the second conversion from the first TIRA is clearly not a disallowed reconversion because the first conversion was never sent back to that account.
Of course, anyone doing a complete conversion initially will not have any other assets, and must then wait until the time frame in your question expired to avoid a disallowed reconversion.
Permalink Submitted by James Rosato on Mon, 2009-07-27 22:08
July’s issue…page 5…..left-hand column…5th paragraph…..states……”He just has to wait until at least 30 days have passed or until the calender year after the conversion, whichever comes later.”……same page right-hand column….top paragraph…..”In this case, Grant is already in the year after the conversion so he only has to wait until 30 days have passed since the recharacterization.”……Here’s my confusion…..Grants is already in the year after the conversion so why does he have to wait another 30 days to re-convert…..???
Permalink Submitted by Alan Spross on Mon, 2009-07-27 22:21
He does not have to wait now that he is in 2009, but your first question was whether he could have re converted on 10/2/08, and he could not have reconverted in 2008. He needed to wait until 1/1/09 to reconvert the same assets.
Your most recent post asks whether he can now reconvert in 2009, and he can because he is both in a new calendar year AND he has waited over 30 days from the recharacterization date. The reconversion would be a 2009 conversion, reportable on his 2009 income tax return.
Permalink Submitted by James Rosato on Mon, 2009-07-27 22:34
Got it…Thank you…