IRA Recharicterization from Roth
taxpayer converted 40,000 to Roth in 2016 and then recharacterized 5,000 back to the IRA in March of 2017, but it was valued at 5500. How is the 500 gain handled and reported on the return for 2016?
taxpayer converted 40,000 to Roth in 2016 and then recharacterized 5,000 back to the IRA in March of 2017, but it was valued at 5500. How is the 500 gain handled and reported on the return for 2016?
Permalink Submitted by David Mertz on Thu, 2018-09-13 16:21
The $500 gain attributable to the $5,000 that was recharacterized is not reportable on the 2016 tax return except as part of the statement explaining why $5,500 was transferred. The gain simply becomes part of the balance in the traditional IRA which will be taxed when eventually distributed.
Permalink Submitted by Ray Evans on Thu, 2018-09-13 17:54
Thank you very much
Permalink Submitted by Ray Evans on Thu, 2018-09-13 17:55
Thank you very much
Permalink Submitted by Alan - IRA critic on Thu, 2018-09-13 16:42
If taxpayer was subject to RMDs in 2017, the recharacterization transfer of 5500 must be added to the 12/31/2016 balance to calculate the 2017 RMD because it was considered an outstanding conversion at the end of 2016.