Multiple Roth Conversions
Taxpayer converted a Traditional IRA into 4 separte Roth IRA’s (A, B, C, D) in 2010. Taxpayer has an extension for his 2010 tax return. Roth IRA holds a private equity investment that is requesting additional capital. If funds are transferred from Roth B to Roth A, does taxpayer lose ability to recharacterize Roth A or Roth B?
Permalink Submitted by Alan Spross on Mon, 2011-05-23 15:45
If funds are transferred between A and B, the two conversions that funded A and B can still be recharacterized. However, the calculations will now have to include the combined investment results of both A and B.
If taxpayer was planning to retain only the best performing conversions, A and B are now treated as if they were converted into the same Roth account originally, so the strategy would be diluted with respect to those two conversions. Of course, C and D are unaffected.