Instructions For Form 8606 - Nondeductible Iras

3. You made a contribution to a

and on line 18c the amount

nondeductible contribution) to

Roth IRA and later recharacterize part

recharacterized, excluding earnings

recharacterize the contribution.

or all of it to a traditional IRA.

or any loss. If you received a

Completion of Form 8606. Jodi

distribution from a Roth IRA in 2000,

enters her nondeductible traditional

Any recharacterized conversion will

complete the rest of Part III as

IRA contribution of $2,000 (not

be treated as though it had not

instructed.

$1,900) on line 1. Her previous

occurred. Any recharacterized

traditional IRA basis of $10,000 is

contributions will be treated as having

Note: You may receive a Form

reported on line 2. Because Jodi did

been contributed to the second IRA

1099-R for each conversion (showing

not receive any other distributions

and not the first IRA. You cannot take

the distribution from the traditional or

from her traditional IRAs in 2000, she

a deduction for a contribution to a

SIMPLE IRA) and a Form 1099-R for

then completes only lines 3 and 12

traditional IRA if the amount is later

each recharacterization (showing the

(entering $12,000) as instructed.

recharacterized. The amount

distribution from the IRA). Or, you

transferred must include related

In Part II, Jodi enters $100,000 on

may receive one Form 1099-R

earnings or be reduced by any loss.

line 14a. She also enters $100,000

showing the net results of all your

on line 14b and -0- on line 14c. She

transactions, with instructions on how

Completion of Form 8606 for

does not include the $9,000 of

to enter amounts on Form 8606 and

Recharacterizations

earnings on line 14b (nor would she

on your tax return. In either case,

Traditional IRAs. Complete Part I

have reduced the amount entered on

include the gross distribution from box

of Form 8606 to reflect your

line 14b if a loss had occurred).

1 of all Forms 1099-R on Form 1040,

traditional IRAs after the

line 15a; Form 1040A, line 11a; or

In Part III, Jodi is only required to

recharacterization. For example, you

Form 1040NR, line 16a. Also include

complete lines 18b through 18d

convert a traditional IRA to a Roth

the gross amount of any distribution

because she did not receive any Roth

IRA. Later, you recharacterize the

reported on Form 8606 even if you

IRA distributions in 2000 other than

balance from the Roth IRA back to a

did not receive a Form 1099-R before

the recharacterizations. Jodi enters

traditional IRA. Disregard the

filing your tax return. Because the

$2,000 on line 18b, $2,000 (not

conversion to the Roth IRA and report

Forms 1099-R reflect the fair market

$1,900) as a negative amount on line

the original balances for your

value at the time of the distribution,

18c, and -0- on line 18d.

traditional IRAs on Part I.

the amounts that you enter on this

In January 2001, Jodi receives a

Roth IRAs. If you convert an amount

line of your tax return will likely differ

Form 1099-R for the conversion of

from a traditional or SIMPLE IRA to

from the amounts you enter on lines

$100,000. In January 2002, she will

a Roth IRA and later recharacterize

14a and 14b of Form 8606. Attach a

receive two more Forms 1099-R for

part or all of the amount back to a

statement explaining the difference.

the recharacterizations showing

traditional or SIMPLE IRA, complete

If you do not receive a Form 1099-R

distributions of $109,000 and $1,900.

Part II as follows.

before you file your return, use other

On her 2000 Form 1040, line 15a,

1. On line 14a, report the amount

appropriate records and include the

Jodi enters $210,900, the total of all

you originally converted.

correct amounts on Form 8606 and

three of the distributions. She enters

Form 1040, 1040A, or 1040NR.

2. On line 14b, report the portion

-0- on line 15b because there is no

Example. On May 4, 2000, Jodi

of the amount you originally

taxable amount.

(who is single) converted $100,000

converted that you recharacterized,

Finally, Jodi attaches a statement

from a traditional IRA to a Roth IRA.

excluding earnings or any loss.

to her Form 8606 explaining:

Her basis in the traditional IRA was

3. On line 14c, show the net result

The conversion amount of

$10,000. On July 9, 2000, Jodi

after any changes. If you

$100,000 was recharacterized and

contributed $2,000 for 2000 to a

recharacterized the entire amount you

the amount transferred was $109,000

second Roth IRA.

converted, lines 14a and 14b will be

because there was a $9,000 gain.

On March 31, 2001, Jodi

the same and line 14c will be zero.

Her previous basis of $10,000 is

determined that her 2000 modified

4. If line 14c is more than zero,

reported on line 2 of Form 8606.

AGI for Roth IRA purposes is

complete the rest of Part II as

A Roth IRA contribution of $2,000

$111,000, which is more than the

instructed.

was recharacterized to a traditional

permitted limits for Roth IRA

Statement explaining

IRA and the amount transferred was

contributions and conversions. Jodi

recharacterization. Attach a

$1,900 because there was a $100

recharacterizes the conversion back

statement to Form 8606 explaining

loss. She also indicates that no

to a traditional IRA and

the recharacterization. For example,

amount is deductible.

recharacterizes the Roth IRA

for a recharacterized contribution,

When Jodi receives the two 2001

contribution to a traditional IRA.

attach a statement that shows the

Forms 1099-R in January 2002, she

As of March 31, 2001, the first

total amount recharacterized, the

does not report them on her 2001 tax

Roth IRA is worth $109,000 and the

original contribution, the earnings or

return. The Forms 1099-R represent

second Roth IRA is worth $1,900.

loss, and the amount that is now a

recharacterizations of a conversion

Jodi makes a trustee-to-trustee

deductible traditional IRA

and a contribution made for 2000 and

transfer of $109,000 from the first

contribution, if any.

were reported on her 2000 tax return.

Roth IRA to a traditional IRA to

If you recharacterized contributions

recharacterize the conversion. Jodi

Lines 14a Through 14c

to or from a Roth IRA, complete Part

also makes a trustee-to-trustee

III. Enter on line 18b the amount

If in 2000 you converted amounts

transfer of $1,900 from the second

originally contributed to a Roth IRA

from a traditional or SIMPLE IRA to

Roth IRA to a traditional IRA (as a

Page 5

Instructions For Form 8606 - Nondeductible Iras - 2000 Page 5

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