Oct 30

Question by NewIntheCity: What to do with the capital gain from the excess roth IRA contribtution?
I overcontributed $ 1200 to my roth IRA for 2006. This contribution has made some capital gain. I understand that I need to file a IRA distribution to take out the excess contribution to avoid IRA penalty. However, what should I do with the gain from the excess contribution?


Best answer:

Answer by jerry
Earnings on the excess will be considered as received in the year the contribution was made, and are taxable for that year, plus the 10% penalty (assuming you are under 59 1/2).

You can possibly avoid the excise tax if you more the excess Roth contribution and the earnings on the excess either by transferring to a regular IRA (trustee-to- trustee) before the deadline for the year in which the contribution is made.

I would probably suggest contacting your IRA broker to see if they can help you out and offer any alternatives.

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