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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: Re: Reconverting Roth IRAs Date: 9/16/1998 10:58 PM
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[[Reconverting is the hot topic in Roth IRAs now. If you fit the profile, you can reduce taxes on a
Roth conversion (rollover) you completed earlier this year.]]

Thanks for the info, KAT. This was something that we've been talking about for some time. And as you note, the new proposed regulations make it clear that the "unconversion" can be done for any reason...not just to correct an error.

I believe that the new proposes regulations are now up in the IRS web site. If so, anybody that is interested can check out the IRS web site and look for proposed regulations 1.408A-1 through 1.408A-8. It is really very interesting reading.

One thing that caught my eye was the preamble to proposed regs regarding the "unconversion". This preamble explains that this rule was intended to permit a taxpayer who had converted a non-Roth IRA to a Roth IRA and later discovered that his modified AGI for the conversion year exceeded $100k to back out of the conversion by re-transferring the converted amount to a non-Roth IRA. But, as you say, the actual regulations interprete this rule liberally to provide broad relief to virtually all taxpayers.

I believe that people who are "unconverting" simply to save tax dollars may be in violation of the spirit of the law. But the regulations clearly allow the "unconversion" for any reason. I guess there is too much going on in Washington to try to get any type of clarification from the Congress. Not only that, many people have already "unconverted" due to the downturn in the market. The horse is WAY out of the barn. I guess IRS has decided it is easier to capitulate than fight.

Again, thanks for the update, KAT.

TMF Taxes
Roy
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