bhl1247[at]hotmail.com wrote:

- quote -

It is wrong. You were covered by a retirement plan at your
former employer for at least one day in 2003.

- quote -

Recharacterization is usually what I recommend.

--
Alan
http://taxtopics.net

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I had a question regarding the tax deductibility of my
$3,000 2003 traditional IRA contribution. I don't believe
that I'm an active participant in a retirement plan and thus
should be able to deduct the contribution, however, I was
hoping to get some external input on the research I've done
to date. The situation is as follows:

1) I left my job in July 2003 for a new employer.
2) My new employer has no retirement plan
3) My old employer had a 401k plan, however, I did not
participate at all and there was no matching of
contributions done by the employer
4) My old employer gave a discretionary 401k grant during
February of last year. In order for this grant to vest,
I had to remain with my old employer through July 2004.
As I left that job a year before the vesting date, I
forfeited this discretionary grant in its entirety
(i.e., the money was returned to the company).

Based on my research, I've concluded that were I still
working at my old employer, I would be considered an active
participant even though the discretionary grant had not yet
vested. However, as I left that employer before the grant
date and completely forfeited my unvested grant as a result,
I believe that I'm not classified as an active participant
and can fully deduct my traditional IRA contribution.

Any thoughts on my analysis of the situation?

As an additional question, should I end up being classified
as an active participant does it make more sense to
recharacterize my IRA contribution as a Roth contribution?
I made the 2003 contribution in January of 2004, and as far
as I can tell, I should have until my tax deadline to
recharacterize the contribution (and might as well if I'm
being taxed on that income anyways).

Any help would be greatly appreciated. Responses can be
posted to the newsgroup or emailed to me at
bhl1247[at]hotmail.com

Thanks in advance

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