Recharacterization

The reversal of a traditional IRA contribution or conversion into a Roth IRA, or vice versa.

Recharacterization

In IRAs, the act of making a contribution to a certain account, then deciding to apply the contribution to a different type of IRA. For example, if one has both a traditional IRA and a Roth IRA, one may make a contribution to the traditional account, then decide that it would be more beneficial to apply the contribution to the Roth account. Recharacterization is subject to certain rules. Primarily, one may not recharacterize tax-free rollovers or employer contributions.

Recharacterization.

When you have converted one type of individual retirement account (IRA) to another type -- such as a traditional IRA to a Roth IRA -- and then convert it back to the original type, you are recharacterizing the IRA.

Similarly, you can recharacterize a contribution you've made to one type of IRA as a contribution to another type of IRA. In either case, when the recharacterization is handled correctly, the original conversion or contribution is erased, as if it never happened. To be valid, a recharacterization must be handled as a transfer between IRA providers or internally by a single provider.

Further, it must be completed before the date your tax return is due, including extensions. You must also report the action to the IRS, and in some cases, you must file an additional form.

Recharacterization

Recharacterization is the process of changing the character of a traditional IRA contribution to a Roth IRA contribution or vice versa.

References in periodicals archive ?

However, current tax law also prohibits recharacterization (reversal) after a Roth IRA conversion.

Mid-year tax planning

Parish wrote that the court's dismissal was a "knee-jerk order" based on an incorrect reading of his lawsuit and that a recharacterization would not have been appropriate.

Judge denies Parish's request for resentencing

Despite knowing that such transactions were prohibited by the fund, Berger took affirmative steps to recharacterize the nature of the transfers so that they would appear to be loans, and he caused documents to be changed retroactively to support that recharacterization. The result was that the government was able to prove that Berger knowingly aided and abetted Burrill's tax evasion.

U.S. v. Marc Berger: A Cautionary Tale for Return Preparers

A circuit split has emerged on the issue of debt recharacterization in bankruptcy.

Bankruptcy, Debt Recharacterisation, and the Constitution: An Erie Relationship

24 where relevant ministries explained the WTO recharacterization, and why Taiwan should not benefit from preferential treatment given to developing economies under WTO rules.

Developed economy status paves Taiwan's path to CPTPP membership

1.469-7 allows recharacterization of some or all of a member's self-charged interest income (including guaranteed payments for the use of capital) from portfolio to passive.

Loans between members and LLCs

Rather than treating amounts failing the three-year test as ordinary income (as has been the typical recharacterization under prior versions of proposed carried interest legislation), section 1061 treats such gain as short-term capital gain.

New IRC Sec. 1061 three year holding period requirement

Transactions undertaken purely for tax purposes that have no independent business purpose are generally held to be subject to recharacterization under the doctrine.

First Circuit allows DISC dividends paid to Roth IRAs

Framing the incident in terms of a "stand down" order is nothing more than an "artful recharacterization" of inaction as action something the 4th Circuit has said is inappropriate.<br />In fact, the 4th Circuit has never issued a published opinion finding a successful "state-created danger" claim.

WDVA: State defendants not liable for Unite the Right inaction

The recharacterization rules were valuable because when a client converts an IRA to a Roth, he or she pays taxes on the entire value of the amount converted at his or her ordinary income tax rates.

Small-Business Retirement Rules Shift Under New Tax Law

Under a new "per se" rule, the proposed regulations mandate the recharacterization of debt instruments to equity if the debt is issued by a corporation to a related company (1) in a distribution, (2) in exchange for expanded group stock, (3) in exchange for property in an asset reorganization, or (4) in transactions funding these first three transactions.

TEI comments on section 385 proposed regulations allowing IRS to recharacterize related-party debt to equity