Roth IRA conversion
The following was suggested to me and doesn’t make sense: Say one converts $100,000 from a traditional IRA to a Roth IRA in year 1, and by February year 2 the Roth IRA is now worth $125,000. Someone said that if the original $100,000 is reconverted to the traditional IRA, you can keep the $25,000 growth in the Roth. I would have thought that the entire amount, $125,000 , would have to be reconverted to not pick up any income!! Thoughts? sites to confirm?
Permalink Submitted by Alan Spross on Tue, 2011-09-06 20:47
You are correct.
Whenever either a regular contribution or a conversion is recharacterized, an earnings calculation must be completed and the amount moved out of the IRA must be adjusted for earnings or losses. See attached IRS Reg:
http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_A,_…