Inherited IRA

[BP.]

Decedent had an IRA with no named beneficiaries. The IRA passed to the heirs under the decedent's will. My client is one of the heirs, and has received her inheritance payment.

I wasn't sure what to tell her to expect as far as a reporting document. Does the IRA trustee send a 1099-R to the heirs in this case, or will the heirs need to check with the personal representative of the estate to see what part of the inheritance represents the taxable IRA distribution?

[Davc]

Did the check come from the IRA trustee or the estate account? Is your client a residual beneficiary?

[BP.]

Thanks for your reply, Davc!

Did the check come from the IRA trustee or the estate account?

Client said she received a check "from the attorney" so I would say the latter. If it came from the IRA trustee, I would expect the 1099-R from the trustee, and then I probably wouldn't be wondering about where the reporting will be coming from.

Is your client a residual beneficiary?

As opposed to receiving a specific bequest? She is sharing the proceeds with her two other siblings, so probably residual beneficiary. I'll try to clarify with her. Is your thinking here that the estate may have paid the tax? She said the attorney told her she will be paying the tax on the IRA distribution. She is OK with that. I just want to be able to correctly report the amount for her.

[Burke]

Inherited IRA

This sounds like the proceeds were paid to the estate. If so, the estate will receive the 1099R. The executor/administrator (attorney?) will have to do a fiduciary tax return (Form 1041) and K-1's to the benes unless the IRA is the only income to the estate, in which case he may just do 1099R's from the estate to the benes. IRS says any distributions from the estate must be taxable income first, so the part of the distribution which represents IRA proceeds will be taxable to the individual beneficiaries if distributions were made during the Estate's taxable year. The estate may have paid the tax. There could have been withholding from the custodian. There are a lot of unanswered questions here, and I would advise calling the attorney to find out (for instance) if the estate is going to elect a calendar or fiscal year, etc. This distribution may not even be taxable in 2007. Don't guess. Get the proper documentation from the attorney (K-1 or 1099R). That's part of his responsibilities, and I am assuming he is charging the estate appropriately.

[BP.]

OK, thank-you, Burke! Your info helps me to ask the right questions.

[Kram BergGold]

Whoa!

Most attorneys do not get involved with the 1041. Some farm it out to a CPA friend others just expect the trustee or beneficiaries to be on top of this. Don't assume anything when it comes to attorneys.

[Davc]

Most attorneys do not get involved with the 1041. Some farm it out to a CPA friend others just expect the trustee or beneficiaries to be on top of this. Don't assume anything when it comes to attorneys.

Disagree. Expect the worst.

[BP.]

Davc & Mark, I guess that is about the one thing that CAN be assumed/expected, huh?
Cheers!