Excess Contribution to ROTH IRA

[Guest john2491]

Hi,

Need help from you guys regarding ROTH IRA.

Background:

I contributed $5000 for 2011 tax year but ended up unemployed for the whole 2011 which means my 2011 compensation is $0. This also means I have excess $5000 contribution to my ROTH IRA. Now I am trying to calculate how much I should withdraw before Apr 17 since the stock I buy with the contribution has lost its value to $2000.

Market value of my ROTH IRA prior to contribution 35267.85. Market value today (including the $2000 value stock) is 34175.87.

I read an article regarding this situation. It says to calculate Net Income Attributable (NIA) (or loss for my case) and add/subtract from the excess contribution to arrive to the amount I need to withdraw. The NIA literature: http://www.retirementdictionary.com/defini...attributablenia

My NIA turns out to be -$154.81 which means I still need to withdraw $5000-154.81=$4845.19.

QUESTION: Is this correct? It seems like it is not a very fair calculation since the the value of stock (I buy with the excess $5000) has lost its value by almost $3000 and I get to only deduct $154.81 for the withdrawal.

Shouldn't the withdrawal be whatever the current value of the stock I bought with the excess $5000 contribution? The account statement shows a clear cut where the $5000 go and there is no dividend from the stock.

Please advise. Thank you.

[K2retire]

Please don't take this as the final answer, but if you can clearly identify that you bought XXX shares of ABC company with the contribution, wouldn't selling those exact shares and withdrawing the proceeds solve your problem?

[Guest john2491]

Please don't take this as the final answer, but if you can clearly identify that you bought XXX shares of ABC company with the contribution, wouldn't selling those exact shares and withdrawing the proceeds solve your problem?

Exactly! Any expert opinion on this matter? Please help. Additional info: I wired in the contribution in one time lump sum therefore the statement shows clearly where the excess contribution went.

[masteff]

I'm sorry, but you don't have choice in the matter. Here is the IRS guidance: http://www.irs.gov/pub/irs-regs/td9056.pdf (unless anyone knows of newer guidance that superceeds, but I didn't see any in the brief glance I took).

PS: I disagree with your calculation of the loss attributable to your return of contribution...

5000 * [ (34175.87 - (35267.85+5000) ) / (35267.85+5000) ] = -756.43