In January '02 converted about $12,000 of my IRA to a Roth; due to market decline (well, my stock picks!), value in Roth fell to roughly $5700 so in October '02, converted all back to IRA. Received 2 1099-r's from brokerage firm...one for initial IRA conversion of the $12,000 with Box 7 code 2 (early distribution); the second 1099-r for $5700, Box 7, code N (recharacterized IRA and de-characterized also in '02). On my prepared taxes, the accountant shows the difference of $6300 as taxable - why is that? I thought there would be no taxable event since, in essence, I did nothing taxable as all done within same year. Does anyone have a clue? Thanks in advance for your help!

You should not have any taxable income from a Roth conversion/recharacterization (assuming the rechar represented ALL the conversion amount plus earnings, which can be negative).

1. Read the instructions for reporting recharacterizations in Pub 590 closely. You will probably need to attach a statement to your return showing the transaction details.
2. Fire your accountant.

Thanks for affirmation that I'm correct! Sent a fax to my accountant requesting explanation of my return so will wait to hear from him.