rmd-inherited-ira
Need some input!!
IRA owner passed away in March of 2008. Three beneficiaries split the IRA in June of 2008. RMD for 2008 based on owner’s age is $15000. If one beneficiary withdraws $5000 and one or both of the other beneficiaries fail to withdraw their share, who is on the hook for IRS penalties??????
Permalink Submitted by Alan Spross on Thu, 2008-09-25 22:26
The penalty can easily be excused if the 15,000 is withdrawn next year and a 5329 is filed with the owner’s final return with a request to excuse for reasonable cause. The IRS expects that owners will pass without having taken their RMD for the year of death and perhaps even earlier years.
But if time drags on and NO ONE will take the RMD, then the penalty will eventually be assessed with interest. I cannot tell you if the IRS will be concerned with equitably charging the penalty to the two who took nothing or will bill the penalty equally to all beneficiaries. That probably depends on various subjective determinations by the examiner. Note that the IRS does not care which beneficiaries take the 15,000 RMD, as long as it is distributed within a reasonable time.
The beneficiaries who do not want to take distributions may also be triggering penalties of their own if they do not take RMDs of their own by 12/31/09. Under a recent PLR, they may not necessarily lose the stretch, but to preserve the stretch, they will have to pay the 50% excise tax for each year they fail to take their own RMD.