Is this allowed: Roth -> Traditional -> Roth? And how to report gain?

[happy_sam]

In other words, is re-characterizing Roth IRA to Traditional IRA because of MAGI limit, and then later converting that Traditional IRA back to Roth IRA allowed?

And, is the gain taxable? For example, suppose I had $5000 in my Roth IRA, and then at the time of re-characterization, $5500 was transferred to Traditional IRA ($500 gain). And finally, $5500 was converted immediately to Roth IRA. Is the $500 taxable? And if so, how do I report this?

Many thanks!

[DianeC958]

Yes, the gain is taxable if this was all done during the same year.

You should receive a 1099-R with for the distribution from Roth IRA putting it into a Regular IRA which the distribution amount will include the gain.  Then you will have a second 1099-R for the distribution from the regular IRA going into the Roth IRA.

The form 8606 needs to be included with your return to show that only the gain on your Roth IRA account is taxable because the rest of the amount is a non-deductible contribution.

[happy_sam]

Thanks, @DianeC958!

On your statement, "Yes, the gain is taxable if this was all done during the same year": How would it be different if this was all done in different years? Thanks again!