I converted about 4k to a Roth in 1998 and paid the 1/4 tax on my return. The investment however has nosedived and is worth about 40% of the original amount. Can I recharacterize the amount back to an IRA and then convert to a Roth again thus decreasing the taxable amount?

Rather than focus on the tax issue... you need to think about what you are doing with your investment. You just paid over $2000 "tuition", did you learn anything? If you are new to investing, then perhaps your mistake was putting 4K into one investment which went south. I am just guessing, but perhaps you should have been in a more broadly based mutual fund.

The longer you are an investor, the more you realize how often you are wrong. Long shots bets... been there, done that, got burned a few times. Time is your one true ally. Think long term. Good luck.


[This message has been edited by John G (edited 06-11-99).]

Thanks to IRS Announcement 99-57, you can still do a recharacterization of a 1998 conversion, even if you filed your return (timely) by 4/15/99.

If you now do a 1999 conversion, it will ALL be taxable this year. Think about that.