Simple tax query--inheritance
MZB
1) Adult daughter inherits total of $5000. cash. Is this taxable?
2) Adult daughter (age 55) inherits IRA of $5000. value. I understand she
MUST start taking distributions? Is this correct? If yes, must she do this
in current calendar year? Is this distribution taxable?
Mel
Arthur Kamlet
>Mother passes away.
>
>1) Adult daughter inherits total of $5000. cash. Is this taxable?
No.
>2) Adult daughter (age 55) inherits IRA of $5000. value. I understand she
>MUST start taking distributions? Is this correct? If yes, must she do this
>in current calendar year? Is this distribution taxable?
Did mother begin required minimum distgributions or not?
In any case, daughter will re-register the IRA as
[daughter] as beneficiary of [mother's] IRA
and each distribution will be taxable. If mother had contributed
nondeductible moneys then a form 8606 will compute the taxable portion;
otherwise all distributions are taxable.
MZB
Mother was 84 years old at time of death so yes she was taking
distributions.
Mother had inherited the IRA from her husband who had passed away 20 years
earlier, so it was not a ROTH IRA.
So, am I correct that daughter MUST take distributions immediately upon
transfer and that these distributions are taxable to her?
Mel
"Arthur Kamlet" <kam...@panix.com> wrote in message
news:f28bjk$i18$1...@reader2.panix.com...
Mark Bole
> Mother was 84 years old at time of death so yes she was taking
> distributions.
>
>
> So, am I correct that daughter MUST take distributions immediately upon
> transfer and that these distributions are taxable to her?
No, that is one option (the timing, not the taxability). There are
several others but in general the money must be distributed and taxed
within five years or less. The custodian of the IRA normally provides a
form that allows you to make one of several choices.
-Mark Bole
Phil Marti
> Mother was 84 years old at time of death so yes she was taking
> distributions.
>
> Mother had inherited the IRA from her husband who had passed away 20 years
> earlier, so it was not a ROTH IRA.
>
> So, am I correct that daughter MUST take distributions immediately upon
> transfer and that these distributions are taxable to her?
Yes, distributions are taxable income to the daughter. She has various
options regarding the timing, including basing distributions on her life
expectancy. See page 35 of IRS Publication 590.
--
Phil Marti
Clarksburg, MD