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Trying to be brief about this ... for a friend ...

How does a 2009 partial Roth recharacterization work?

1. $16,000 was converted to a Roth in 2009. The thinking was that it would move taxable income from a negative amount to a slightly positive amount.

2. I made a goof in TT "what if". I'll spare you the detail on that if that is OK?

3. She will most probably have to recharacterize about 1/2 of the Roth conversion to get back to about zero taxable income. There is only one Roth account and this is the first and only conversion. The Roth is invested solely in one stock with a bit of remainder cash.

4. So, how is this partial recharacterization handled in the simplest manner possible?

5. Is this the situation where the custodian (Vanguard) has to determine the amount and allocation? Or not. Or is it as simple as asking for a certain # of shares or a percent of the account be recharacterized? Is the request generally done through forms or can it be done on line? That would be VBS (Vanguard brokerage service).

6. I have never done a partial recharacterization before and am drawing a blank on how to proceed.

7. She, the friend, is the tax novice, but she is smart enough to have caught what looked to her like a TT error. And, I've told her it was actually my error through use of an override and not a problem with TT. We are working long distance now. She can input the itemized deduction detail in TT and get a much better tax estimate than I did with the override error. She wants to be at roughly $0 tax but not negative taxable income as in the past.

8. Her tax return will be completed by a CPA, not me, well before 4/15/2010. She turns over tax information to the preparer in good form, completed. Meaning ... she will not be asking him for the recharacterization amount. OK? We can do that, I think.

9. Will she have a 1099R from VG for this transaction, or not? If not, then what? I'm drawing a BIG blank at the moment.

I would very much appreciate direction on how to keep this real simple, if possible. Thanks a lot.

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