Schedule a deduction for inherited IRA

[Kram BergGold]

My client inherited an IRA and 403 (b). The estate valued these at $100,000. Only $23,000 of which got taxed as the rest was sheltered by the the unified credit. The estate tax paid was $10,000.

If in year 1 she receives a $23,000 distribution does she get a $10,000 deduction

amount received $23,000
_______________________________________ X $10,000 = $10,000 Schedule A
$23,000 deduction

or should it be

$23,000
_________ X $10,000 = $2300 Schedule A deduction

$100,000

[JG EA]

My client inherited an IRA and 403 (b). The estate valued these at $100,000. Only $23,000 of which got taxed as the rest was sheltered by the the unified credit. The estate tax paid was $10,000.

If in year 1 she receives a $23,000 distribution does she get a $10,000 deduction

amount received $23,000
_______________________________________ X $10,000 = $10,000 Schedule A
$23,000 deduction

or should it be

$23,000
_________ X $10,000 = $2300 Schedule A deduction

$100,000

The basis remains with the IRA. So, I don't think she can just take the taxable part out first. See if you agree TTB 13-24 and Pub 590.
As for the deduction it talks about this in pub 559

The deduction for estate tax can be claimed only for the same tax year in which the income in respect of a decedent must be included in the recipient's income.

So, it seems to me that this also would remain with the total IRA and be taken on the A as you go.

[Kram BergGold]

page 21-33

JG EA

we are not dealing with basis here, however thanks for pointing me in the right direction. I found in TTB page 21-33 that the denominator is the full value of IRA not the part that caused the tax.

[Kram BergGold]

Maybe not

In TTB example both with and without the IRD the taxable estate income is beyond the exemption so the difference in tax is attribtable to the entire amount of IRA. In my case when I remove the IRD the estate would pay no tax. So here the estate tax is only on a fifth of the total IRA. I wonder if this makes a difference and the denominator should be $23,000 and not $100,000.

[Kram BergGold]

final answer I think

I checked pub 559. The denominator seems to be the entire value of the IRA which in my case is $100,000.

[JG EA]

Yes I misunderstood. But I like these kind of things to think about. I ask myself where would I find the answer to this and then try. Sometimes I get the right answer and sometimes not.