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In 2012 I opened a traditional IRA and a Roth IRA account and contributed $5,000 to each. Unfortunately, I made some bad investments and have lost about 75% in both accounts. I would like to deduct as much of these losses for income tax purposes as I can. Specifically, I would like to recharacterize the $5,000 traditional IRA contribution as if it had been contributed to the Roth IRA account. I would then withdraw the entire balance of the Roth IRA account prior to April 15th, 2013, thus avoiding any penalty on excess contributions to the Roth account. Then I would deduct the losses as a misc. itemized deduction, subject to the 2% threshold. Any problems with this? I would also like to make a new $5,000 contribution to the traditional IRA account for 2012, so I can get the above-the-line income tax deduction. Provided this is done after the above-described recharacterization, but prior to April 15, 2013, any problems with this? thanks in advance!
