Distributions from an inherited IRA for Virginia residents
I am told that Virginia tax law treats an inherited annuity (e.g. a distribution from a 403b) as a death benefit and therefore does not tax it. Supposedly, this is new from 2007. I rolled over a large distribution, into an inherited IRA. I have 2 questions: 1. Could I have rolled this distribution over to an inherited Roth IRA? 2.Can I recharacterize this inherited IRA to an inherited Roth IRA? I am trying to restore the tax benefit that this rollover apparently is entitled to. Can someone on Ed Slott’s staff help me out. Thanks.
Permalink Submitted by Alan Spross on Wed, 2009-09-16 02:38
1.) You could not have rolled an inherited 403b or other employer plan to a non spouse inherited Roth until 2008 (not 2007). After 1/1/2008, you could have converted the account to an inherited Roth subject to the 100,000 modified AGI limit.
2) No, you cannot recharacterize the rollover or convert the inherited TIRA once the transfer was made.
The above points reflect federal tax law. I cannot comment on VA state tax law.