@dmertz wrote:
The custodian's calculation is correct. I have no idea how you are coming up with $7,500. If you are saying that the value of the shares of Stock A purchased with the $7,000 has now risen to $7,500, that is not how you are to determine the attributable gain.
"(but the earnings due only to the Stock A purchases are much less)."
This statement is irrelevant. The calculation is is required to be done on the value of the entire account, not on the performance of any particular investment in the account..
It's because $500 is the value that the Stock A shares increased over the computation period. The other $2500 has nothing to do with the contribution being recharacterized.
To make it simpler for you, assume that the $7000 contribution was never used to purchase any sort of security and sat as $7000 cash from the date of contribution to the date of recharacterization. There would obviously be no gain attributable to the contribution in this situation. $7000 on the date of contribution would still be worth $7000 on the date of recharacterization. The account would have still increased by $2500 as a result of the assets previously in the account, just as it would have if no money had been contributed to the account at all during 2024. In this situation, the formula would say that the net income is $1,029.41, which obviously makes no sense since there is no gain from $7000 held in cash.
