Announcement

Collapse
No announcement yet.

Inheritance: IRD or 1041

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Inheritance: IRD or 1041

    Disclaimer: I searched the message board and found a post from March 25 2008 (posted by NotEasy and titled "Inheritance") that is somewhat similar to this situation. Koss responded to that post, leaning toward reporting on the client's return rather than a 1041. However, that was 4 years ago and I was wondering if opinions have changed or if anyone has had a similar experience since then.

    Scenario:
    Husband died 10 years ago, however his traditional zero basis IRA was never transferred to the beneficiary, his surviving spouse. RMDs continued to be deposited to the spouse's bank account with the husband's name and SSN.

    Spouse died in 2010 without naming a beneficiary to the IRA inherited, but not transferred, from her husband. No Form 1041 was done as all other assets were jointly owned with the spouse’s two daughters, and this IRA was unknown by them at the time.

    In 2011, more than a year after the spouse's death, when the account was discovered, a total distribution of the account was made for just under $8300. A 1099-R was issued by the bank to "the estate of" the now deceased spouse, but in the spouse’s SS number. I have copies of the checks for the distribution which indicated that each daughter received a check for ½ of the distribution.

    Question – Should I just report my client’s portion on her return, and do I report it as an IRA distribution or some other way? (I have the bank’s ID # so I could enter it that way.) OR must I do a 1041, even though no 1041 was required for the first year and no estate was ever opened or estate ID# obtained?

    Thanks.

    #2
    IMO, no 1041 should be filed just for this one item. You would have to apply for an Estate EIN, and the only thing you would accomplish is unnecessary paperwork. IF the two daughters were the only heirs, and IF no taxes were withheld by the custodian and reported to the IRS under the deceased's SSN (let's hope not), just report the 1/2 on each daughter's return (assume your client is one of the daughters) and move on. Of course the 1099-R is incorrect because they used the deceased's SSN, but it shouldn't even generate a CP2000 for 2011, as no return would have been filed for her. If taxes were withheld, or if there were more heirs, then there are other issues to deal with.

    Comment


      #3
      Thanks, Burke. That was what I was hoping to hear.

      Comment

      Working...
      X