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  • bee September 2011
  • Derf September 2011
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Anyone Recharacterizing their 2010 Roth Conversion (deadline Oct 17, 2011)?

edited September 2011 in Fund Discussions
In 2010, I converted a portion of my self directed IRA into seven individual Roth Accounts. I purposely created seven individual Roth accounts so that I could track the gain or loss over the re-characterization grace period providing me with a simple way to convert only the accounts that produced a positive gain. Each account had an investment theme. They were as follows:

Emerging Market
Real Estate
Sml/Mid Cap Equity
Precious Metals

I took a slightly conservative approach to these investments in that any 10-20% gains were converted into cash. I did these conversions in the very last week of 2010 so I did not take full advantage of the re-characterization grace period. What I mean by this is that if I had done the conversion in January of 2010 I would have added an additional 11 months to the grace period. As you may recall there was a lot of uncertainty as to the Bush Tax cuts and Roth provisions for 2010. I waited for clarification.

I now have until October 17th, 2011 (TY2010 extension period) to re-characterize any accounts I converted in 2010 that I do not want to convert at this time. Many (6) accounts have lost value since the date of has not. That one account is holding onto a mere 2% gain. This account was invested in PRMTX = T Rowe Price Media and Technology. The other accounts show losses of:

Emerging Market = (-2.4%)...I hold shares of VWO & EDV (EDV shares bought after 15% gain in VWO)
Energy = (-1.2%)...I hold shares of VDE & EDV (EDV shares bought after a 16% gains in VDE)
Healthcare = (-3.9%)...I hold VHT
Technology = (+2%)...I hold PRMTX
Real Estate = (-3.92%)...I hold VNQ
Sml/Mid Cap Equity = (-5.2%)...I hold PRNHX and PRDMX
Precious Metals & Mining = (-3.52%)...I hold VGPMX

Wondering if anyone else made a Roth conversion for 2010 and whether you will be re-characterizing some or all of your conversions?



  • Way to go bee !! I like your 7 different accounts approach ! I haven't done any conversions, but would like to hear what you decide to do. My Question to you: If you re-characterize at a loss, will you have to pay the tax on your loss (at this time) or can you add money to bring yourself back to the beginning balance ?
    In other words if you start with $70,000- $10,ooo / account & lose on average 5% / account . Will you need to pay taxes on the loss $3500 ?

    Thanks, Derf
  • Reply to @Derf:

    Hi Derf,

    By creating (7) separate $5K accounts I am able to decide which account to actually convert in 2011. and which I chose to re-characterize (return back to self directed IRA status). I probably would not want to convert accounts that proved to be "losers" (worth less than when I converted).

    You can not "back fill" accounts that have lost value with additional monies. These accounts can be re-characterized without a tax consequence.
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