Permalink Submitted by Alan Spross on Wed, 2011-05-25 23:30
Yes, they can. This is addresssed on p 18 of Pub 590.
A non spouse beneficiary cannot combine the inherited IRA basis with any basis they may have in their owned IRA account. If they have both such IRA accounts and take distributions from both, they would have to file a separate 8606 for each one.
Anyone who has a TIRA balance that had after tax rollovers or non deductible contributions at any time will have unrecovered basis when the owner passes. The 8606 instructions do not correctly addres this because the year end value is indicated as determining the basis factor with no exception for the year of death. But in the year the owner passes, the date of death value should be used to recover basis for the owner, and the year end value should be used to apply any remaining basis to beneficiary distributions. Using the year end for both will result in basis not being applied in proportion to the amount of the distribution each party took. Who knows how the IRS resolves this mess when it occurs? Probably by the luck of the draw.
Of course, a spousal beneficiary who assumes ownership can then combine inherited basis with basis on their own IRAs.
Also, if there are multiple beneficiaries, they must receive basis in porportion to their share of the IRA at date of death. They should not attempt to reapportion basis per some other method later on.
Permalink Submitted by Alan Spross on Wed, 2011-05-25 23:30
Yes, they can. This is addresssed on p 18 of Pub 590.
A non spouse beneficiary cannot combine the inherited IRA basis with any basis they may have in their owned IRA account. If they have both such IRA accounts and take distributions from both, they would have to file a separate 8606 for each one.
Anyone who has a TIRA balance that had after tax rollovers or non deductible contributions at any time will have unrecovered basis when the owner passes. The 8606 instructions do not correctly addres this because the year end value is indicated as determining the basis factor with no exception for the year of death. But in the year the owner passes, the date of death value should be used to recover basis for the owner, and the year end value should be used to apply any remaining basis to beneficiary distributions. Using the year end for both will result in basis not being applied in proportion to the amount of the distribution each party took. Who knows how the IRS resolves this mess when it occurs? Probably by the luck of the draw.
Of course, a spousal beneficiary who assumes ownership can then combine inherited basis with basis on their own IRAs.
Also, if there are multiple beneficiaries, they must receive basis in porportion to their share of the IRA at date of death. They should not attempt to reapportion basis per some other method later on.