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 In This Update:
  • Make a FULL IRA Contribution in 2011
  • Ruling to Remember: Know the Rules and Follow Up on Transfers
  • Q of the Month: How to Handle a Roth Recharacterization

 Resources  Expert Professional



?? Question of the Month: How to Handle a Roth Recharacterization

Q: I would like to roll over a portion of my Traditional IRA to my Roth IRA. Should it be rolled over to the existing Roth IRA account or to a separate new Roth IRA account? I do not want to lose the ability to recharacterize the rollover should my investment diminish. Does putting the rollover money in an existing account disallow recharacteriztion?

A: The fact that you might want to recharacterize means that you should consider establishing a separate Roth IRA for the amount being converted. If you use the existing Roth IRA for the conversion it would not prohibit you from recharacterizing. It would, however, make it more difficult because you would have to consider all the assets in the account for gains and losses that must be attributed to the amount being recharacterized.




New Income, Estate & IRA Tax Rules
2010 Tax Act Highlights

The The January issue of Ed Slott's IRA Advisor Newsletter highlights some of the most important aspects of the 2010 Tax Act, which the President signed into law on December 17, 2010.

The main items covered in January’s issue are: the estate tax for 2011-2012, the estate tax for 2010 (you have 9 months from the date of the law’s entactment for 2010 estate tax returns), the top federal income tax rate and a discussion on charitable IRA distributions extended through 2011.


Inside Ed Slott's IRA Advisor Newsletter

New Income, Estate & IRA Tax Rules
2010 Tax Act Highlights

  • Estate Tax for 2011-2012
  • Estate Tax for 2010
  • What to Tell Your Clients
  • Top Federal Income Tax Rate Stays at 35%
  • Charitable IRA Distributions Extended Through 2011

Top IRA Rulings of 2010

  • Legislation
    • Roth IRA Conversions Under TIPRA
    • Health Care Legislation Small Business Jobs Act
  • Court Decisions
    • Charles Schwab & Co., Inc. v. Debickero
    • Peggy A. Sears v. Commissioner
    • James T. Colegrove, et ux. v. Commissioner
    • Bartels Trust v. U.S.
    • United States of America v. Philip A. Kaiser
    • Creditor Protection for IRA Benficiaries
  • Private Letter Rulings
  • Treasury Memo

If you are not already an Ed Slott's IRA Advisor Newsletter subscriber, you can preview past issues before subscribing.

January Key Focus


Happy New Year!! This is the first business week of 2011. So what does that mean for you? Probably a whole lot of catching up on paperwork and other tasks that were put on hold during the holiday season. But it also signals the start of your 2011 financial plan, which should at least consider making an IRA (or Roth IRA) contribution if you are eligible. And if an IRA contribution is a part of your plan, you should be making that contribution as soon as possible. Sure, you have all the way until April 15, 2012 to make your 2011 IRA contribution, but should you wait that long?

Absolutely not.

If you can afford to make your full IRA contribution at the beginning of the year every year, you should try and do so. Think about it. If you made a contribution on January 2nd each year as opposed to April 15th of the following year, isn’t that like getting an extra year of tax deferred growth on every contribution you ever make? And if you are making a Roth IRA contribution, that growth could be income tax free as well. In any one year it might not make a huge difference, but added up over time, making your contributions early in the year should leave you with substantially higher retirement savings.

For 2011, the maximum IRA contribution is the lesser of your earned income or $5,000. If you are 50 or older by the end of the year, you can contribute an extra $1,000 for a total of $6,000. Traditional IRA contributions may not be made in the year you turn 70 ½ or later, but Roth IRA contributions may be made until any age (as long as you have earned income).

You might be thinking to yourself, “But wait, it’s only January 3rd. I haven’t earned enough income in 2011 yet to make my full IRA contribution.” Well, there’s good news for you. You don’t need to have the earned income by the time you make your IRA contribution as long as you have it by the end of the year. So if you will have $5,000 ($6,000 if you are 50 or over by the end of the year) of earned income by the end of 2011, you can still make your full contribution now.

So don’t wait! Go make those IRA and Roth IRA contributions and get your 2011 financial plan jumpstarted the right way!


Ruling to Remember


"John", a 64-year-old male, was concerned over the recent drop in the value of his IRA due to the violatile economic conditions. He contacted the financial institution that held his IRA and spoke with an employee, who "John" contends, told him that he would have 90 days in which to roll over any funds withdrawn from the IRA into another eligible IRA without suffering tax consequences.

"John" subsequently withdrew an amount of money from his IRA and deposited it into his checking account. On a later date, he attempted to roll over that amount within the 90-day period. However, he was then advised that the rollover was no longer possible because the 60-day rollover period had expired.

The financial institution, to its credit, acknowledged that its employee’s advice was misleading and issued an apology for any confusion. The IRS reviewed the PLR and determined that "John’s" inability to accomplish a timely rollover was due to misleading information provided to him by the financial institution.

The IRS waived the 60-day rollover requirement with respect to "John’s" withdrawal and gave him a 60-day extension from the issuance of the ruling to contribute the funds into a rollover IRA.


Institutions continue to make mistakes, and the IRA owner needs to know the rules and follow up on any transfers.

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