Stumped......IRA Question

[Guest MVICK]

Hello all:

I've got a couple of IRA questions and thought maybe you all could help.

OK, say I contributed $2000 to a Roth for 1999 and $2000 for 2000 at Etrade.

Well, in January 2001 I transfered the entire amount to a Vanguard Roth IRA. The entire account balance at the transfer date was $2061. Yes that's correct, 4000 in contributions to a balance of $2,061, oh well.

Anyway, I want to recharacterize the 2000 contribution to a traditional to take the deduction for this year. After tax season, I'll roll it back to a roth.

My question is, if I want to rechar. the year 2000 $2,000 contribution, how will vanguard determine the attributable gains / losses with that contribution? Or, is it just assumed that each 1999 and 2000 contribution is now worth approximately 1/2 of their previous balance.

Obviously, this would have been easier recharacterizing at the old custodian as they have all of my contribution records and Vangard only has the one "transferred" amount and has no idea if the balance is from many years of small contributions or just one contribution in 2000.

Do you understand my issue?

Thanks a bunch in advance,

Marshall

[John G]

You are going to do all this paperwork and tracking to save the taxes on $1000 (perhaps 1/2 of the 2k in year 2000) which may amount to $280? You also want to ask a discount brokerage with which you no longer have an account to go back over their records to determine the values? Etrade is not exactly noted for "extended" service. Vanguard has nothing to do with your prior IRA activities. If you use an accountant, you will probably pay more for tracking and reporting the changes then you will save on taxes.

You will be chasing your tail on this one. My advice, forget about your proposal. I wonder when custodians are going to start charging for this kind of research and transactions.

[Appleby]

MVICK,

This IRS issued document explains how to determine how much you should recharacterize ( the amount will represent the $2000 contribution, even though it will be less than $2,000)

It's quite simple- show it to your CPA.

When you give the current custodian instructions to rechacterize, the amount you provide should take into account the loss.

[Appleby]

Sorry- I forgot to attach the document

http://ftp.fedworld.gov/pub/irs-drop/n-00-39.pdf