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[[ I opened a Roth IRA this year, everything fine...]]

I assume that you mean that you made a Roth IRA contribution (not a conversion) in 1998. The words "this year" and "last year" tend to lose their meaning this time of year.

[[ However during 1999 my wife will be going back to
work and my part time business will contribute
an unknown amount to my income. Its quite possible
that come 2000 tax return time we will find ourselves
over the Roth contribution limit.]]


[[ I would like to contribute my $2k to my Roth this
month to maximise my potential gains, but what happens
if in 12 months time if I find I'm over the contribution limit?]]

You'll either have to recharacterize your Roth IRA back to a regular IRA (either deductible or non-deductible, depending upon your circumstances). Or you can close the Roth IRA account completely. You'll pay no tax or penalties on the original contribution, but you'll pay ordinary taxes and penalties on the EARNINGS that you made in the Roth IRA account.

[[ 1) Can I convert my Roth contribution to a regular
IRA contribution.]]


[[ 2) What happens to any gain or loss that I make on the
$2k I invested,]]

If you converrt back to an IRA, absolutely nothing, either gain or loss. But if you close the account and take the distribution: If it's a loss, nothing. If it's a gain, you'll pay taxes and penalties on the distribution.

[[ and if its relevant how would I
calculate the loss/gain given that the money will be
agrigated with my previous contributions?]]

You'll have to do your best to "carve out" your second distribution and the gains on that specific distribution. Since the funds will be co-mingled, you'll most likely have to make some computations based upon the balance of the accounts at different dates, and then allocate the total earnings to each account. The IRS hasn't told us specifically how to do this (and most likely will not). They just say that the earnings on the account must be removed with the contribution.

You can read more about the recharacterization issue in my post on that issue in the Taxes FAQ area. You can also read more about the Roth IRA in my series of posts in the Taxes FAQ area (archives section). Check it out.

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