INHERITED IRA
I believe i am right but just wanted to make sure of it. If a client inerites an IRA from his Mom who was taking rmd’s and he is only 45…
a. i know his rmd each year is taxed but not penalized the 10%.
b. but if he takes more than the RMD amount will he be hit with the 10% penalty?
Thanks
Doug
Permalink Submitted by Alan Spross on Mon, 2008-05-05 17:24
An early withdrawal penalty never applies to distributions from an inherited IRA, regardless of how much is distributed.
With respect to the ordinary income tax, the client show check to see if his mother had a basis in her IRA from making non deductible contributions as far back as 1987. If so, he would inherit his share of any remaining basis. Look for Form 8606 on her latest tax return since she was taking RMDs. It would show any remaining basis.
The client must also take any RMD due for the year of his Mother’s death if she did not take her full amount that year, and he should name his own successor beneficiary ASAP.