BPickerCPA

You can do it as long as you wait more than 30 days after the recharacterization. You can no longer convert the same funds twice in the same year, in any event.

I think you may have to get guidance from the local probate court. The tax implications will follow based upon who is permitted to be the bene.

To my knowledge, none of the rulings have been issued yet. I have a few pending, and I understand that they should be out within a couple of weeks.

I don't know what tax bracket you will be in when you get the distribution. It's possible that the distribution itself will put you in a higher bracket. My suggestion is to make sure that the pension must pay out all next year. Sometimes the plan itself will allow a five year payout, although they are not obligated to. It the pension must be taken by next year, and it's substantial enough, see if they will give you part of it this year so that you can split the income over two years. Barry

I checked the pub and the regs, and the example in pub 590 is WRONG. In the 1998 pub 590, they had a similar example where the example 2 withdrawal was in 2002 and the example 3 withdrawal was in 2003. Apparently in the 1999 version they updated the years but did not change the original conversion from 1998 to 1999. So whereas in the 1998 pub 590 the withdrawals were in years 5 and 6, in the 1999 version they are in years 6 and 7. The pub is clearly in error. Great catch! Barry

The IRS views 2004 as the first year that you can take the conversion out penalty free. At least that's what pub 590 says. I'm looking into it since I don't necessarily agree.

1) If you withdraw conversion money after five years, no 10% penalty tax no matter how young you are. 2) Earnings will always be subject to income tax until they become "qualified withdrawals" and will always be subject to the 10% penalty tax until an exception applies.

You can only convert your IRAs, or only your wife's, or both, or neither. You can also convert part of any IRA. You cannot directly convert a 401k account.

Your friend has a big problem. First of all, the letter rulings cited have nothing to do with your question. Second, there is no legal authority for putting the money back into an IRA, especially if the broker is going to issue a 1099R and 5498. That will notify the IRS what happened and will add a 6% excise tax for excess contributions, on top of the other problems. You should not do this without the IRS' blessing via your own letter ruling. I doubt you will get it, but it may be worth a shot. You should know that there are cases pending that are trying to hold brokers responsible for the erroneous information such as was given here. I would look into that possibility. The advice the IRS provider is giving now sounds like they are trying to cover their own behind. Talk to a real IRA pro and see what should be done. Barry

The rules for taxing social security specifically state that tax exempt INTEREST, that is, interest from state and local obligations, is included in the computation. Roth IRA distributions are NOT tax exempt interest. However I cannot guarantee that there won't be law changes in the next 35 years! Barry

Your question is of a legal nature that I suspect may be different for different localities. You should ask a local attorney.

To clarify Paul's comment, you can only move the IRA assets in a trustee to trustee transfer. You CANNOT do a rollover. Once the custodian issues a check, the IRA is dead. No 60 day period to put it back.

Only an individual can own an IRA. A revocable trust cannot be the owner.

You've converted $100K and effectively recharacterized $50K, so you will be taxed on $50K.

If earlier in the year you converted traditional IRA A into Roth IRA AA, you can now convert traditional IRA B into Roth IRA BB. You can later recharacterize the conversion that's in Roth IRA AA, and you have not run afoul of any rules. You just have to make sure you do it the right way. Barry

If I understand the question correctly, as long as you are qualified to fund a roth IRA, where you take the money to fund it is of no consequence. You can just write a check for $2K to the Roth custodian, again, as long as you qualify by having earned income and your total income is within the limits.

If you take money out in year 2000, which is the third year of the four year spread of conversion income, you will cause an acceleration of income to be reported in year 2000 from the original conversion. You cannot recharacterize a 1998 conversion at this time. You can take the money for a first time home (limited) and avoid the 10% tax on early withdrawal but you cannot avoid income tax on any earnings withdrawn since the account has not been in existence for over five years.

You can recharacterize EACH conversion. You are not limited to only one recharacterization per year. However even if you only recharacterize fund B, the computation of how much of the original conversion you've "canceled" will be based upon the value of all of the funds.

Money taken from a Roth IRA that is attributable to Roth earnings are penalty free if used for qualified higher education costs, but they are not income tax free.

Only cash can be contributed to a Roth IRA.

Once withdrawn there is no way to restore it. Rollovers are NOT permitted on inherited IRA's.

There may be increases in profit sharing upper limits and keogh percentage increases.

All provisions of the bill are effective no earlier than 2001. As of now, the bill is somewhere in the Senate. It appears to me that with Congress looking to adjourn this coming week to go home and campaign, the prospects for this year are bleak. I suspect that if it does not pass this year, it will come up again in some form next year, but the effective dates will then get pushed back a year.

Unfortunately the PLRs in question do not apply to this fact pattern. Here, the wife is the beneficiary on the RBD, and is later replaced by the son. Since the son was NOT the bene on the RBD, his life is never a factor. The change of bene to the son has NO effect for RMD purposes. While the husband and wife are alive, the RMD is based upon the recalculated joint life expectancy. When the husband dies, the son inherits the account as the bene. The RMD is then based upon the single recalculated life expectancy of the wife, for as long as she lives. When she dies, the account must be emptied by 12/31 of the following year.

As long as the income is high enough to fund the SEP, and low enough to qualify for a roth conversion, you can do both. It's a good deal for those that can "get away with it".