IRS Notice Limits Roth Conversions

Washington, DC, October 20, 1998 - The Internal Revenue Service released Notice 98-50 to address questions regarding whether a taxpayer who has converted a traditional IRA to a Roth IRA may transfer the amount back to a traditional IRA in a "recharacterization" and subsequently reconvert that amount from the traditional IRA to a Roth IRA. The Notice sets forth interim rules describing the tax treatment of such reconversions, effectively limiting taxpayers to one such reconversion per year. The rules are effective prospectively as of November 1, 1998 and apply for 1998 and 1999. The Notice includes seven examples of the application of these interim rules.