Avrum Lapin wrote:
- quote -

mean that you had the excess changed to an IRA contribution. This
requires that you compute the earnings on the excess. The
earnings could be negative. The Treasury published regulations in
2003, that explain how this calculation is performed.

This calculation does not use what happened to the shares you
bought. The calculation uses the change in FMV adjusted for the
contribution times the excess contribution.

Here's an example:
FMV of Roth before the contribution = $100,000
Contribution = $5000 (Excess turns out to be $1000)
FMV of Roth at time of recharacterization = $102,000.

Net Income = $1000 x (102000 - (100000 + 5000)) / (100000 + 5000)
Net Income = $1000 x -3000 / 105000
Net Income = $1000 x -2.86% = -$29

Therefore, the amount that has to be recharacterized is $971.

Note that if you do not have access to the FMV directly before
the contribution and at the end (e.g., you only have month ending
data), then you would use the FMV at the end of the month just
before the contribution and you would use the FMV at the end of
the month that is just before the month of the recharacterization.

If the contribution created the ROTH, (there was no balance),
then the change in value of what you bought and sold fits the
equation.

You don't have a deductible loss because you still have an open
Roth IRA.

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I over contributed to a Roth in 12/08. I realized the problem in 1/09
and re-charcterized the overage.

At the time I made the contribution I bought shares in a mutual fund at
$15.14 each. When I re-characterized the shares were only worth $14.82
or a drop of 2.113%. I sold shares before I actually made the re-
characterization and so the broker transferred slightly less than I
requested.

Do I get a schedule D short term loss
If yes how do I calculate it.
Will this show up in 2008 or 2009.

In hindsight I should have pushed the overage into my 2009 contribution.
If I did how would I let the IRS know (i.e. what form)

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >