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If you have not filed your 2002 income tax, do not until the problem is corrected. Pay any taxes due by April 15th but you apply for an extension if the problem is not corrected. Contact your IRA administrator immediately to correct the excess contribution.

It is likely to late to preserve the IRA. Ask the IRA administrator if there is any other option that withdrawing the excess contribution but do not be surprised if there isn't. I believe, the improper conversion is now an excess contribution to the ROTH IRA and a withdrawl from your traditional IRA subject to the 10% penalty. There is a 6% tax PER YEAR tax on the excess contribution. If you correct this by April 15th or the due date of your 2002 return, you should be able to avoid the 6% penalty for 2002.

You have already paid income tax on the contribution amount. Only the return should be additional regular income.

I hope, you have proof that the financial advisor made this recommendation. I would try to make him pay the penalty and taxes that resulted from his mistake.

Good Luck.
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