Question on a partial recharacterization and conversion to a Roth.

[Guest AaronWenger]

This past April, I had a traditional IRA with contributions I had made for the 1998 and 1999 tax year. I had happened to contribute to one mutual fund for the 1998 tax year, and a different mutual fund for the 1999 tax year. In April (around the 5th of the month), since I couldn't afford to convert the entire balance of the IRA (1998 + 1999), I only wanted to do a partial recharacterization of my 1999 contributions to a Roth IRA. My financial institution, First Union, told me that this transaction would have to be based on the entire value of the IRA (contributions + growth from the 1998 fund), not just the contributions I made for tax year 1999. This seemed to agree with what I have recently read on your co-sponsored Rothira.com website: "If you have an account where some assets have increased in value while others have decreased in value, you cannot get the benefit of the decrease by only recharacterizing the losers. The account is viewed as one big pot, and the computation is based on value, not on specific identification of assets."

I filed for a four month extension for my taxes. When the Roth account was finally set up, it was May, but First Union made a mistake by recharacterizing the share amounts of the wrong fund. I left those shares in the Roth account, and had the other fund's shares recharacterized to a Roth. This went through in June, but a representative told me they would be backdated to April 11, 2000. Currently, I have an IRA worth roughly $1700 and a Roth IRA

My question is: When I calculate my 1999 taxable IRA contributions/conversion amount, should I use the value of the funds as of April 11, or the value at the individual dates that the funds were converted by First Union? Also, am I to base the partial conversion on the total value of the fund shares converted, minus the basis for my 1999 (post-tax) contributions and the ratio for my non-deductible 1998 conversions?