Recharacterize a Rollover IRA made Sep/2000 because asset value worth

[Guest BobHank]

Hi,

I converted a Rollover IRA in Sept, 2000 to a Roth IRA.

Since then, the value of the IRA has decreased 25%.

I want to avoid paying taxes on this 'lost' 25%.

It is now Jan 24, 2001.

An IRA specialist at Fidelity told me that I can recharacterize my 2000 IRA to a Traditional IRA.

However, I won't be able to convert the Traditional IRA

BACK to a Roth until January, 2002.

She said if I would have recharacterized by Dec 30, 2000, then I would have been able to reconvert to a Roth in 2001. I would just need to wait 30 days.

My question: Is this correct?

What is the shortest amount of time I can recharacterize my Roth conversion to a Traditional IRA, then convert the Traditional IRA back to a Roth?

Thank you very much for your help.

[BPickerCPA]

If the IRA specialist told you this, she isn't much of a specialist.

The rule is that if you recharacterize a conversion, you cannot reconvert those same funds until the LATER of the year after the YEAAR OF THE CONVERSION, or the 31st day after the recharacterization. Since the conversion occurred in 2000, you are already in the year after the year of the conversion. So now you only have to meet the 31st day after the recharacterization rule. If you recharacterize in January, you can reconvert as early as February.

Barry

[Guest BobHank]

Thank you very much, Mr. Picker. I really appreciate your advice, and helping out on this matter.

And I'm extremely impressed with the technical quality and professionalism of the whole BenefitsBoard. It's simply outstanding.

[John G]

Be aware that you "request" a recharacterization (or conversion) and then the custodian takes anywhere from a day to a few weeks to act. You have little or no control over the actual date actions are taken. Therefore, normal market swings between your date of request and date of posting may erode OR exagerate the impact of what you seek to accomplish. During peak weeks (late December, April) the backlog of IRA activity makes the timing even more unpredictable.