- An individual made a contribution to one type of IRA and wants to move less than 100% of that contribution to the other type of IRA ( from traditional IRA to Roth IRA , or from Roth IRA to traditional IRA)
- An individual wants to recharacterize less than 100% of a conversion
- An individual wants to recharacterize 100% of a contribution or conversion, but the conversion or contribution was made to an account that has other source of funding, such as other contributions, conversions, transfers, rollovers etc. In sum, the transaction being recharacterized is not the only credit to the account from which the recharacterization is being made.
- The formula in TD 9056 must be used to determine the current value of the amount being recharacterized. For instance, if $100,000 was converted and only 50% of it is being recharacterized, the formula must be used to determine the current value of 50% of $100,000
- The amount being recharacterized can be less or more than the original value, depending on the market performance of the entire account for the computation period.
Important: The Tax Cuts and Jobs Act of 2017 repealed the option to recharacterize Roth conversions, for Roth conversions done after 2017. As such, only regular contributions to traditional IRAs and Roth IRAs may now be recharacterized.