Inherited IRA – Distribution

Submitted by Stephen Hodson on Wed, 2016-12-07 19:55

Father – age 80- died in July 2016. Had been taking RMDs, but not for 2016.

2 Daughters beneficiaries – 53 and 55.

Does father’s RMD for 2016 have to be taken by 12/31/2016 or 12/31/2017?

Can the daughters do inherited IRAs then have the RMD taken?



Submitted by Alan - IRA critic on Wed, 2016-12-07 21:22

  • It should be completed by 12/31/2016, but many beneficiaries cannot determine the RMD status of the decedent for a considerable period of time, and decedents pass too late in the year for these affairs to be wrapped up before year end. Therefore, if the year of death RMD is not completed by 12/31/2016, the beneficiaries can file Form 5329 on their 2016 returns requesting waiver of the penalty for reasonable cause. The IRS will almost always grant the waiver. But before filing the 5329 the RMD should be completed and so stated in the explanation of reasonable cause.
  • Since this is the year of death RMD, it can be taken in any proportion between the two beneficiaries if they can coordinate that. It is taxable to the beneficiaries in the year distributed.
  • It can be taken before or after the separate accounts are established since the separate accounts must be created by non reportable transfer.

Submitted by Stephen Hodson on Fri, 2016-12-09 14:42

I just wanted to say Thanks for answering so quickly and clearly.  It’s amazing how many different answers people get – not just from advisors, but from the firms themselves.  

Submitted by Stephen Hodson on Fri, 2016-12-09 14:49

Sorry, but I did have a follow up question on this case. Does the father or the the daughters pay the tax?  Does it go on his 2016 1040 or theirs? 

Submitted by Alan - IRA critic on Fri, 2016-12-09 16:37

It goes on the return for the beneficiaries that received it (second bullet point in prior post). The 1099R will report under the beneficiary SSN. It does not go on the father’s final return.

Submitted by Stephen Hodson on Fri, 2016-12-09 18:27

Thanks

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