The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  KAT & Pixy, does this fly? Date:  10/7/1998  2:12 PM
Author:  phuzz Number:  5909 of 106126

If I may impose on you for a moment, this is my situation regarding recharacterization of Roth IRA and the steps I plan on taking to achieve a tax benefit due to depressed values. Do I have it right or will I crash & burn?
2 existing Roth's, 1 is contributory with Ameritrade for FY1998(approx. 2% increase since established), 1 is rollover with Kaufmann Fund from previously established (c. 1995) Traditional IRA (significant decrease since rollover). Funds in Traditional IRA were all deductible contributions.
Step 1 - Liquidate & Transfer Kaufmann to Ameritrade Roth;
Step 2 - Unwind entire Ameritrade Roth to Ameritrade traditional IRA (transfer notification specifying that this is a recharacterization of Roth IRA);
Step 3 - Convert traditional IRA back to Roth IRA.

If I understand correctly the amount converted in Step 3 is the amount for which I incur the tax liability. Any potential tax liabilities from the initial contribution and rollover are superseded by the unwinding and reconversion. As asked above will this fly or flop?
Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us