Inherited IRA distributions for medical

[Possi]

Just checking in with the "office" to be sure I'm doing this right.

My client, in 2008, took out 70k from an inherited IR, inherited from her mother. It was all taxable, box 7 code 4, so no penalty.

She took this money out because she couldn't work, she was sick all the time.

In 2009, she was diagnosed with Leukemia and was hospitalized for several months. I am just now doing the 2009 tax return, and the 1099r's (distributions from inherited IRA's) now have dist code 1, box 2 taxable amount not determined, and there is nothing in box 2.

I know her medical will far exceed 7.5% agi, and I can get her out of the penalties.

My question is this, would there be a situation where all of bx 1 may not be taxable? No way for me to know/prove any basis in these.

thanks~

[Burke]

If the current distribution is really from her inherited IRA, then the distribution code is wrong. It should not have changed and it should still be 4. Need to investigate further. Don't know why any part of distribution shown in box 1 would not be taxable unless there were basis involved. Are you sure these are not her IRA's? Inherited IRA's usually have the deceased's name as part of the addressee. Match this one with last year's 1099 IRA account number. If they are hers, under age 59 1/2 would be early distribution, code 1. There is more than one?

[Possi]

Yes, they are inherited

If the current distributions are really from inherited IRA's, then the distribution code is wrong. It should still be 4. Need to investigate further.

The recipient is my client followed by (bene)

I guess I'll call tomorrow.