Permission for late recharacterization granted

[BPickerCPA]

We have received, on behalf of a client, a positive letter ruling from the IRS that permits the client to do a late recharacterization of their improper 1998 conversion.

A key factor in the discussion was that the request was made prior to the IRS coming after the taxpayer. This concurs with my previous discussions with the IRS that they would be more lenient with taxpayers who voluntarily come forward rather than wait for the IRS to come to them.

Has anyone heard of the IRS contacting a taxpayer on an improper conversion since the 12/31/99 recharacterization deadline? I'm wondering if the IRS is trying to give taxpayers as much time as possible before they take action.

[Guest reg_h2b]

Thanks for the update Barry,

This confirms my discussions with the Service also. One wonders why they couldn't simplify the recharacterization extension process if they are going to be this liberal in their rulings.

I'm told the extension rulings are fairly short. In your PLR was the recharacterization election (as opposed to the recharacterization asset transfer) made after the 12/31/99 deadline?

You say the fact that the taxpayer came to the Service was key: was that the only criteria that seemed to be critical to a positive ruling? Anything else?

In our PLR, the recharacterization election was made on 12/31/99 but the custodian failed to make the asset transfer by the 12/31/99 deadline. The ruling is still outstanding.

As to your question, I have not heard of any audited failed recharacterizations; one would think that there would be at least some before the statute of limitations expires (4/1/2002?).

[BPickerCPA]

Besides the point about the taxpayer coming forward, there was also some stuff about the complicated rules, the taxpayer didn't know, their accountant didn't tell them, etc.

Basically the stuff we said to the Service in the request.