OLF writes:

So there really isn't a benefit to switching the contributions to 2002 then. I thought that if I switched them over I might avoid the penalty. Or am I missing something here?

I also saw an option to withdraw the contributions before the date I file to avoid the penalty. However, since it was all equity contributions, I would still take a loss. Again, doesn't seem like a good idea.

(Basically, I discovered that I was not eligible to contribute any amount and I contributed the maximum amount, so we're looking at 2K here.)

The only way to avoid the penalty is to withdraw the excess along with its associated earnings (or loss) by April 15. The IRA provider will do the computation for the gain or loss. In your case it would be a loss. That is claimable only if you itemize. Then it goes into the Miscellaneous section of Schedule A and means something only if the loss exceeds 2% of your adjusted gross income. You will have to decide what's best for you, paying the $120 penalty for the excess and using the contribution for 2002 or taking the loss on your principal as a result of the withdrawal.

Regards..Pixy