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Retirement tax questions
I think the argument can be successfully made that the code R 2018 Form 1099-R showing a gross distribution of $11,000 transferred to the traditional IRA represented the sum of the recharacterized $10,000 conversion made in 2017 and the a recharacterization of some amount of the regular $6,500 Roth IRA contribution made for 2017 in 2017. $9,000 of the $11,000 transferred would represent the $10,000 recharacterized. You would then need to figure out how much of the regular Roth IRA contribution would have to have been recharacterized to result in a transfer of $2,000 to the traditional IRA. If the regular Roth IRA contribution occurred on the same day that the conversion contribution was deposited into the Roth IRA, the Roth contribution would have seen the same 10% loss in value by the time of the recharacterization. (The gain or loss for a recharacterization is calculated over the entire balance in the Roth IRA.) For $2,000 to represent 90% of the contribution, the contribution amount would be $2,000 / 0.9 = $2,222.22. Working the calculation in the other direction to check the result, recharacterizing a total conversion and regular contribution of $12,222.22 that saw a 10% drop in value would result in 0.9 * $12,222.22 = $11,000 to be transferred to the traditional IRA. (Of course these are just round numbers. You'll have to calculate the gain or loss on the regular contribution a bit more precisely and substitute the appropriate value for the 0.9 used above.)
Trustees generally will combine distributions from the same account and having the same box 7 code onto a single Form 1099-R, so the 2018 Form 1099-R that you receive should look exactly the same as if your intent had actually been to do these two separate but simultaneous recharacterizations. Treating this as two simultaneous recharacterizations is way easier than anything else since it involves no cooperation by the trustee and no assertion that the code R 2018 Form 1099-R is wrong.
To make sure that you are calculating the loss percentages correctly, review CFR 1.408-11:
<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/cfr/text/26/1.408-11">https://www.law.cornell.edu/cfr/text/26/1.408-11</...>
Trustees generally will combine distributions from the same account and having the same box 7 code onto a single Form 1099-R, so the 2018 Form 1099-R that you receive should look exactly the same as if your intent had actually been to do these two separate but simultaneous recharacterizations. Treating this as two simultaneous recharacterizations is way easier than anything else since it involves no cooperation by the trustee and no assertion that the code R 2018 Form 1099-R is wrong.
To make sure that you are calculating the loss percentages correctly, review CFR 1.408-11:
<a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/cfr/text/26/1.408-11">https://www.law.cornell.edu/cfr/text/26/1.408-11</...>
‎June 6, 2019
9:29 AM