Recharacterization
Person has pretax balance in an IRA and makes a nondeductible contribution. Then converts the full balance. Then the bill comes and wants to re-characterize just the dollar amount that was pretax.
Because before the conversion he had commingled money he would then have a portion of the pretax and portion of the aftertaste amount being re-characterized correct?
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2015-03-13 02:46
Yes, that is correct. If the conversion was 60% taxable, and a partial recharacterization is completed, the amount not recharacterized will also be 60% taxable as calculated on Form 8606. The person might consider recharacterizing the entire conversion if he can roll the pre tax TIRA balance into his employer plan. He can then reconvert tax free after the waiting period.