non spousal inherited IRA RMD
I have a client who inherited an IRA from a non spouse. The owner of the IRA passed away March 7th 2006. My client did not get account in her name until may 30th 2007. She does not have the value on 12/31/2006 she was 41 when she passed away. She has not taken the RMD’s and we calculated all them stating with 2008. and took them out in December and will file all the 5329’s for each year and ask the IRS for a waiver. I’m not sure how to handle 2006 and 2007. The owner was 41 in year she passed away so was not required to take RMD in 2006,and my client did not receive the acct in her name until 2007. so do we calculate RMD starting in 2008 or do we calculate one for 2007 but we do not have the 12/31/2006 value. Please advise. We know there is the risk that she will not be granted a waiver on the penalty but we want to try for one anyway. Please advise.
Permalink Submitted by Alan - IRA critic on Wed, 2015-01-07 19:40
Client had a 2007 RMD based on the 12/2006 balance and initial divisor from Table I would be based on client’s age as of 12/31/2007. That divisor would then be reduced by 1.0 each year thereafter, except that no RMDs were required for 2009. RMDs started again in 2010 and client would reduce the divisor used in 2008 by 2.0 to get the 2010 divisor. Another potential problem is that the IRS might not approve restoring life expectancy RMDs without paying the penalties as was done in PLR 2008 11028. So the choice might come down to paying the penalties on the life expectancy delinquent RMDs OR being subject to the 5 year rule and appealing the penalty based on the 12/31/2012 balance.