A Roth IRA which a 45 years old son is the sole beneficiary. Roth IRA was established by his mother in 1999, who died in 2006 at the age of 67. The FMV of the IRA at the end of 2005 was $21,000, of which $5,000 for the earnings.If the son decided to withdraw the whole amount in 2006, how much is the son's reportable income? Please help. Thanks!
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Nothing is taxable to the beneficiary if distributied within the required time for a nonspouse beneficiary (generally within 5 years of death). -
Though I agree in this case there is no tax due, I'm going to disagree a bit with Old Jack's reasoning in his 5 year rule.
A "Qualified Distribution" from a Roth is tax free. To be a Q.D., the distribution must be AFTER the five-year taxable period beginning with the year the first contribution to the Roth was made and the distribution must satisfy one of the following: §408A(d)
a) made after TP reaches 59.5
b) made to beneficiary (or estate) after the death of the TP
c) attributable to TP becoming disabled
d) qualified first-time home buyer exception upto 10K
Assuming mom contributed to the Roth in 1999, the 5 year period is over and you have a Q.D.
New York Enrolled AgentComment
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I agree with the previous post and since the first contribution was made in 1999 the 5 year waiting period for tax free distributions had expired, however, it actually doesn't matter as item (b) listed is in fact a distribution in this case of death and therefore not taxable and not subject to the 10% penalty tax regardless of the time mom started the Roth. The 5 year rule I was mentioning is that the beneficiary has to withdraw the funds under the same rules and time frame as a traditional IRA non-spousal beneficiary.Last edited by OldJack; 09-19-2006, 01:48 PM. Reason: add: regardless of the time mom started the RothComment
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Old Jack
I have to respectfully disagree with you. To have a qualified distribution you need TWO conditions. You must have the account open for five years beginning with the year of the first contribution (§408A(d)(2)(B)) AND one of the 4 scenarios described in the earlier post (§408A(d)(2)(A).
New York Enrolled AgentComment
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correct
New York you are correct, I had forgotten the word "and" as it relates to both the 5 year from the first contribution "and" the death of the taxpayer to qualify.
As this case obviously was after 5 years and the cause of distribution was/will be the death it should not be taxable to the beneficiary if proceeds are paid within 5 years.Comment
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Thank you Old Jack and EA of NY!Comment
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