Form 1099R

[S T]

Client inherited IRA from deceased Mother, option was to rollover to her own IRA, which was done. Brokerage house claims they do not have to issue a 1099R with a code 4G - as it was not a taxable event.

Does this seem correct that there will be NO 1099R - seems like the amount shoud be reported on the tax return. I am just feeling if not reported, there will be a CP2000 in a year or two? Have received these notices in the past.

Thoughts

Thanks

Sandy

[JohnH]

Sandy, I think the trustee handled it incorrectly from the start.
The inherited IRA can't be co-mingled with an existing IRA unless it's a spouse as beneficiary.

Unless there's a way to reverse this administratively, the client may have to remove the money from her own IRA, plus pay tax on the entire distribution from the mom's IRA. (No early distribution penalty would apply even if the beneficiary us under age 59). This should have been segregated into a beneficiary IRA and the appropriate distribution plan set up, depending upon mom's age and beneficiary's age.

[ttbtaxes]

Oftentimes, clients go ahead and do things they shouldn't. When it comes to IRA money and death, the tax adviser is usually the last line of defense if we know about things in due time. The first line of defense is the investment adviser and institution handling the money. They should have known that a child could not roll a mother's IRA into his (her) own.

[Roberts]

the appropriate distribution plan set up, depending upon mom's age and beneficiary's age.

Be interesting to see if this portion was just ignored by the broker / trustee.

[Kram BergGold]

Unsure of Interpretation

When S T said it was rolled to child's IRA it may have been properly rolled to a inherited IRA in the daughter's name. Brokerages approach transfers differently. Some report all transfers and some do not. Hopefully, this is a Brokedrage that does not.

[Gretel]

I would want to see account statement to find out if indeed the inherited IRA was co-mingled. If mom was subject to RMD the bene needs to take them too, spread over her own life expectancy.

[S T]

It is a beneficiary IRA and not co-mingled.

[Roland Slugg]

It is a beneficiary IRA and not co-mingled.

When discussing IRA matters, it's important to use the correct terminology. A beneficiary can't roll a decedent's IRA into his own traditional IRA. He can, however, roll it into an "inherited IRA." This might be what you meant when you wrote "beneficiary IRA," but that is NOT the correct name. Funds that are moved from a decedent's IRA to an "inherited IRA" must be transferred via a trustee-to-trustee transfer, and such transfers are not reported on a form 1099-R. If that's what your client did, then there was no rollover ... just a transfer.

You may also wish to take a peek at IRS Pub 590-B which covers this at the top of page 5.

[S T]

Thanks Roland,
I checked with the brokerage that received the distribution from the deceased Mother's IRA, and in fact have all of the statements and the account information on transfers which were direct trustee to trustee, and the daughter's account is labled Name, Beneficiary IRA, and is set up for annual RMD moving forward into 2015 and future.

My concern was the 1099R reporting as the transfer from the Mother's account took over 5 months for that Brokerage to get it right. The Mothers Brokerage transferred to daughter , then "reclaimed" then transferred a second time, then dribbled in more dividends, and a reversal of a Brokerage Fee.

It needless to say has been a "nightmare" in tracking all of the account split between 4 beneficiaries and making sure all was transferred. Deceased Mother's brokerage also was not providing monthly statements for tracking, so we have had to rely on the receiving Brokerage/Trustee to provide once it was received at the Beneficiary Account.

Sandy

[JohnH]

I think I'd be thinking about reversal of a Borkerage relationship.

[S T]

The Brokerage relationship that the deceased Mother had is now terminated. All of the beneficiaries have gone to other Brokerage Services. That has been accomplished!

S