Depends on what your combined federal and state marginal tax brackets are. If you were in the top tax bracket and lived in NYS and after coping with AMT you would pay in excess of 50% - and remember the top federal may end up being 39.6% for 2010.
So while it really sounds good at first glance you need to do the math with your tax professional.
What makes it worthwhile this year is that if it doesn't work out you can put it back if the original IRA and undo it tax free AND you can pay the tax over two years this year only.
But the key is that you really need the assets to appreciate significantly for the math to work out. So in my own case unless WAVX is between $8-10/share by the end of the year I'm probably going to "recharacterize" back to my original IRA therby calling the whole thing off. The math could still work out if/when Wave appreciates significantly in the five year waiting period to pull money "tax free" from the Roth IRA, but my plan was to sell shares in my after tax account to pay the taxes - so the risk/benefit only works out for me if Wave appreciates this year.
So again - DO THE MATH WITH YOUR TAX PROFESSIONAL.
Best,
toro
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