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JackLord
Returning Member

Recharacterized non deductible IRA distribution

Background: Last year, I recharacterized my 2022 Roth IRA and 2023 Roth contributions to a regular, non deductible IRA. I fully funded the 2022 Roth ($7k) and funded about $2k of Roth in 2023 before recharacterization. Cost basis in this new IRA was $9k. 
Question: I sold the non deductible IRA shortly after recharacterization when I was at least 59 1/2 years old. How do I report this transaction in TT and what would my tax be? I assumed I would just pay tax on the gain (actually, I sold at a loss) . TT 2023 desktop however seems to to be doing a proforma calc with an onerous tax bill. 

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3 Replies

Recharacterized non deductible IRA distribution

You will get the desired result when you inform TurboTax of your basis of $9,000.

JackLord
Returning Member

Recharacterized non deductible IRA distribution

It’s not the result I desired but what it is. The prorata rule came into play. 

Recharacterized non deductible IRA distribution

If you liquidated your IRA with $9,000 basis for less than $9,000,

your taxable amount should be zero.

 

If you're saying the liquidated IRA already had a basis of $9,000 then a recharacterization marked non-deductible

will give you a new basis of $18,000.

 

@JackLord 

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