Estate as IRA beneficiary with fiscal year
Is it ‘kosher’ for an estate to receive IRA funds in December of 2007, then select a fiscal year (based on date of death) which will postpone payment of tax by the estate beneficiaries until their 2008 tax year?
Permalink Submitted by Alan Spross on Thu, 2008-02-21 19:59
Yes. That fiscal year cannot be more than 12 months, but selection of the ending date can determine which year the beneficiary must report the K1 income.
Permalink Submitted by Marllyn Justice on Thu, 2008-02-21 20:02
Thanks – I wasn’t sure the deferral would be allowed since this is an IRA distribution – in spite of the fiscal year selected by the estate.
Permalink Submitted by Bruce Steiner on Thu, 2008-02-21 23:15
Since the 5-year rule gives you until the end of the 5th calendar year after death, the use of a fiscal year allows the distributions to be spread out over 7 taxable years even where the 5-year rule applies.