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1099R Code 4 taxable?

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    #1

    1099R Code 4 taxable?

    My client has a $62,000 distribution she received when a relative died.
    Boxes 1 and 2 have the total in there. 2b both boxes are marked, taxable amt not determined and total distribution.
    Box 7 is code 4; death and the IRA/SEP/SIMPLE box is marked.

    My client put the money in mutual funds.

    There is no withholding.

    I am looking in TTB for a way that this might not be taxable, but to be treated as a rollover, but I can't find justification for it..

    Is this indeed taxable? If so, they are in big trouble because there is no withholding.
    "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey
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    #2
    It is taxable but no penalty if the deceased was over 59 1/2. NYS allows the first 20,000 to be excluded but don't know if other states do the same.

    Better check where it went and if it was a 60 day rollover into the mutual fund under a shell of an IRA.
    Last edited by BOB W; 03-21-2009, 04:13 PM.
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

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      #3
      What if it was....

      Originally posted by BOB W View Post
      It is taxable but no penalty if the deceased was over 59 1/2. NYS allows the first 20,000 to be excluded but don't know if other states do the same.

      Better check where it went and if it was a 60 day rollover into the mutual fund under a shell of an IRA.
      If it was a 60 day rollover into the mutual fund under a shell of an IRA, would it be taxable?
      "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

      Comment

        #4
        Code 4

        To defer taxation of a death distribution you have to ahve a trustee to trustee transfer and it has to be set up in a special way. Then the beni starts taking yearly distributions based on a life expectency table. Your client got the cash so it ia all taxable in 2008.

        Comment

          #5
          no w-holding

          I questioned it because there was no withholding. It sure seems to me that if I was getting over 62000 that I knew was taxable, I would darn sure have withholding against it.

          Who is to blame for that? My client? Were they given the option to withhold and didn't? Or did the institution issuing the 1099, for some reason, think it would not be taxable?

          I will probably never know the answer. But it makes me look like the bad guy when I lower the boom on them.

          If they inherited all this money, they can cash some in for taxes. It just puts me in an uncomfortable situation. They swished in with no "heads up" that they were going to get slammed this year.

          Ok, I have vented.

          thanks, i feel better......
          "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

          Comment

            #6
            In addition

            since "taxable amount not determined", there is the "POSSI"bility that there could have
            been non deductible contributions into said IRA by decedent.
            ChEAr$,
            Harlan Lunsford, EA n LA

            Comment

              #7
              [QUOTE=Possi;77972]
              "If they inherited all this money, they can cash some in for taxes. It just puts me in an uncomfortable situation. They swished in with no "heads up" that they were going to get slammed this year. "

              I got over being uncomfortable telling clients they owe money a long time ago. They would of received notice from the issuer about thier options, withholding etc. I make myself available 12 months a year so if my clients need help it's very accessable.
              Bottom line is it's taxable no penalty and hopefully they didn't lose half of it in the market .

              Comment

                #8
                And that's probably why they "swished in" and probably "swished out" just as fast, here ya go, see ya later, call me when it's done!

                Because they have an idea it's coming - they're just afraid of how much.
                http://www.viagrabelgiquefr.com/

                Comment

                  #9
                  true that

                  That is highly "POSSI"ble.

                  Still gets my goat. Maybe I'll just put on my big girl panties and tell them to bring their fat wallets to pick this one up!

                  Thanks y'all.

                  "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

                  Comment

                    #10
                    I don't know...

                    Originally posted by ChEAr$ View Post
                    since "taxable amount not determined", there is the "POSSI"bility that there could have
                    been non deductible contributions into said IRA by decedent.
                    ... and since they he is no longer in this world, I will never know. Good point, and the play on my nick name left me laughing again today!

                    "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

                    Comment

                      #11
                      Wasn't there a time

                      when death benefits were non taxable?

                      Comment

                        #12
                        You'd think...

                        ... that it was actually inherited and not taxable, wouldn't you?
                        "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

                        Comment

                          #13
                          Originally posted by erchess View Post
                          when death benefits were non taxable?
                          You are showing our age , if memory serves the non-taxable was limited to something like $5,000 per deceased.

                          Comment

                            #14
                            Death Benefit

                            Yes way back when, an exclusion of up to $4,000 or $5,000 on death benefit, then I think there was also something about a lump sum distribution calculation, was it form 4972. Haven't seen those in years.

                            In fact I lost a client because of the death benefit exclusion one year, as it had expired, and she wouldn't believe me and found another preparer that would take the death benefit exclusion.

                            Sandy

                            Comment

                              #15
                              Possi, you have a goat in your office, brillant.....

                              I need to get one of those. I wonder if it would be a business related expense. A shredder is. Hmmm. Now I dont have to spend so much time shredding. : )

                              Comment

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