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Author: Mukwa Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75830  
Subject: Recharacterization question Date: 10/21/2000 3:03 AM
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After contributing to our 2000 Roth IRA's, my wife and I went over the $160k AGI limit. My question is, how do you determine what earnings must also be transferred when I recharacterize the 2000 IRA contribution to a nondeductible traditional IRA?
For example, if my individual Roth account totaled $50k after the year 2000 contribution, doubled during the year, but the year 2000 $2k part "only" made 10%, is the amount that must be "recharacterized" $2200 (the Year 2000 $2k contribution + $200 earnings) or $4000 (the Year 2000 $2k contribution + $2k from the entire Roth IRA doubling)? I would hate to lose the tax-free compounding the extra $1800 would achieve over the years.

By the way, I didn't see in the 1999 IRS Pub 590 any specific examples on how to determine what the "net earnings allocable to the contribution" is (pg 40).

Any help with this would be appreciated. Thanks.

P.S. Either way, in future years I'm not going to contribute any money to my IRA until after the tax year is over to avoid this problem in the future.
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