In May 2018, Seth converts $100,000 in his traditional IRA to a Roth IRA. The value of the assets in the Roth IRA drops by 40% due to a significant decline in the stock market that occurs in October 2018. The Roth conversion results in Seth incurring $100,000 of taxable income, when he could have waited and converted only $60,000 (after the 40% drop). Which of the following statements is correct?
A) Seth cannot recharacterize the conversion.
B) Seth can recharacterize as long as it is done within six months from the date of the conversion.
C) Seth can recharacterize after December 31, 2018.
D) Seth can recharacterize at any time before the due date of his tax return, including extensions.
A) Seth cannot recharacterize the conversion.
Prior to 2018, taxpayers had the ability to recharacterize a Roth conversion up to the due date of the income tax return, including extensions. As a result of The 2017 TCJA, Roth conversions cannot be recharacterized after 2017.
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