basis in year of death
If a person has basis in non-deductible iras at the date of death, may they deduct that amount in the year of death or does it pass on to their heirs.
If a person has basis in non-deductible iras at the date of death, may they deduct that amount in the year of death or does it pass on to their heirs.
Permalink Submitted by Alan Spross on Sat, 2008-07-19 00:02
It passes on to beneficiaries, and will continue to require an 8606 on the return of beneficiaries as they recover some of the remaining basis each year. The decedent’s prior tax returns will have to be accessed in order to locate at least the latest return with an 8606 on it, since that one will show remaining basis. If decedent was taking RMDs, this should be on the latest return filed. If not, the search could go all the way back to 1987.
There is no option to deduct the unrecoved basis on decedent’s final return as the decedent might for a life annuity ending at death.
If there are multiple beneficiaries, the basis should be equally apportioned between them.
The Inst for Form 8606 are confusing, since it they are taken literally, the decedent would use the year end value of IRAs in the date of death, and if the beneficiaries drained the account, the balance would be -0- and raise a question of who gets to use the remaining basis. On the decedent’s final return, the IRA values on the DOD should be used rather than year end.