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Aspen Office
400 East Main Street
Aspen, CO 81611

Carbondale Office
0326 Hwy 133, Suite 200
Carbondale, CO 81623

The Roth Mulligan

During 2010, for the first time, all taxpayers, including higher income taxpayers, had the opportunity to take money from a pretax traditional IRA or 401(k) account, pay tax on the distribution amount, and then deposit it into a Roth IRA, where it can grow tax free. If you converted your IRA or 401(k) account to a Roth IRA during the 2010 tax year, you have until October 17, 2011 to make two key decisions that affect those 2010 conversions.

First, you can "undo" or "un-convert" the conversion. You might want to do this if, for example, the amount you transferred to the Roth account has diminished in value. Given the current volatility of the markets, this option allows you to review the investments inside your "temporary" Roth IRA and determine if it makes economic sense to take a "mulligan", so to speak, and reverse your 2010 decision.

Second, you can choose to pay the associated tax on the conversion with your 2010 individual tax return, or you can split the income upon the conversion between your 2011 and 2012 individual tax returns and pay the tax with those filings. This choice is only available, however, if you filed your 2010 return by April 18, 2011, or you obtained an extension of time to file. With Congress still mulling over so many key tax decisions, this ability to look in the rear view mirror may be helpful. Considering that the 2010 income tax rates were at historical lows, and considering the uncertainty about what the tax rates may be for 2011 and 2012, it would be wise to monitor the status of tax legislation as October 17, 2011 approaches.

As mentioned, you have until October 17th to make these decisions. If you would like help in analyzing the potential benefits of these issues, or would like to discuss any of the items mentioned above, please contact us immediately. We are here to help !!!

Reese Henry & Company, Inc.
400 East Main Street Aspen, CO 81611
970.925 3771

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