1099-R for Inherited IRA

Submitted by Ron Bernat on Sun, 2017-02-05 22:59

As a beneficiary of my deceased mother’s IRA, I setup an inherited IRA at another financial institution for a custodian-to-custodian transfer of the assets. Should the 1099-R from the delivering custodian be completed as shown below?
Recipient – “My mother’s name FBO the beneficiary name”
Recipient’s Tax Identification Nbr – Beneficiary’s SSN
Box 1 – The gross amount of the beneficiary’s distribution
Box 2a – Taxable amount as blank or zero.
Box 2b – Check both ‘Taxable Amount Not Determined’ and ‘Total Distribution’ boxes
Box 7 – Codes 4,G (Death,Rollover)



Submitted by Alan - IRA critic on Mon, 2017-02-06 00:30

There shouldn’t be a 1099R for a trustee to trustee transfer as these are non reportable. This is also the only way to change custodians because a rollover is not allowed for a non spouse inherited IRA. For your actual distributions including your RMDs, you WILL get a 1099R coded 4. Remember that if your mother was subject to RMDs and did not complete the RMD for her year of death, you and any other beneficiaries are jointly responsible for completing that RMD.

Submitted by David Mertz on Mon, 2017-02-06 13:56

  • Unless the custodian made a mistake in preparing the Form 1099-R, code G being present in box 7 along with code 4 indicates that this was a direct rollover from a qualified retirement plan, not a rollover from an IRA.  If this Form 1099-R also has the IRA/SEP/SIMPLE box marked, it indicates that this is an improper Form 1099-R.
  • It seems a bit odd that the recipient’s name is not shown simply as the beneficiary’s name, but the SSN makes it clear that the beneficiary is the recipient of this distribution.
  • The plan administrator should have forced out any year-of-death RMD and should not have included it in any amount rolled over.  The distributed year-of-death RMD would be reported on a separate code 4 (without code G) Form 1099-R and only the portion rolled over would appear on the code 4G Form 1099-R.

Submitted by Ron Bernat on Fri, 2017-02-10 04:11

My deceased mother has an IRA and I am one of the beneficiaries. The brokerage firm will not be setting up an inherited IRA account for the beneficiaries so each beneficiary has set up an inherited IRA at another firm. How should the custodian move the funds from my mother’s IRA to the inherited IRA at the other firm without creating a taxable liability for the beneficiaries? How should the brokerage firm complete the 1099-R and the other firm complete the 5498?

Submitted by Alan - IRA critic on Fri, 2017-02-10 04:50

As indicated by DMx, a G code is used for a direct rollover from an employer plan. Do you actually have a 1099R or are you asking about the coding on a 2017 1099R not yet issued?  We need to determine if this is an inherited employer plan or an inherited IRA. Either way, the assets must move by direct rollover or direct transfer meaning a check cannot be made out to the beneficiary individually because such a distribution cannot be rolled over. The firm you are setting up the inherited IRA with should request a transfer (if an IRA) or a direct rollover if not an IRA that was inherited. The inherited IRA custodian should issue a 5498 reporting a rollover contribution, but the 1099R coding will vary depending on what type of plan was inherited. Finally, note that if the inherited plan is NOT an IRA the beneficiaries have the option to set up an inherited Roth IRA (taxable rollover) as well as an inherited TIRA (non taxable transfer).

Submitted by Ron Bernat on Fri, 2017-02-10 12:53

I am asking about the 2017 1099-R that will be issued to each beneficiary by the current custodian of my mother’s Traditional IRA account (actually an IRRA and not an employer plan).  Each beneficiary has completed a Transfer Form for the custodian og my mother’s IRA that includes the transfer instructions provided by the receiving custodian where they setup their inherited IRA account. I assume the 2017 1099-R should have Taxable Amount = 0, and Box 7 = 4. 

Submitted by David Mertz on Fri, 2017-02-10 16:00

As Alan said, a trustee-to-trustee transfer of your mother’s traditional IRA to an inherited IRA for each beneficiary is neither a distribution nor a rollover and is therefore not reportable.  The only permissible method of transfer to the beneficiaries’ inherited IRAs results in no Forms 1099-R being issued by your mother’s IRA custodian and no contribution, rollover or otherwise, being reported on the Forms 5498 that will be issued by the receiving custodian(s).

Submitted by Alan - IRA critic on Fri, 2017-02-10 16:02

A transfer from an inherited IRA to a beneficiary separate account will not generate a 1099R since these are non reportable transfers. Any RMD or actual distributions will generate a 1099R coded 4.

Submitted by Ron Bernat on Sat, 2017-02-11 19:09

If a trustee-to-trustee transfer of my mother’s traditional IRA to an inherited IRA for each beneficiary is not reportable, then what should I do if the custodian insists that they will be issuing a 1099-R?

Submitted by Alan - IRA critic on Sat, 2017-02-11 23:23

The custodian must think that a distribution was made. Or possibly if the custodian is small, the person you are talking to needs some training. I believe you are referring to a 2017 transfer, so there is time to get to the bottom of this. This is rare for a brokerage firm to make such an error.   Larger custodians have tax Depts that issue the 1099R forms, but they operate from coding input from whoever processed the movement of funds. Since a custodian should know that a distribution from a non spouse inherited IRA cannot be rolled over, it is inconsistent for the new custodian to even accept the deposit if they knew that a 1099R would be issued by the transferor custodian. While you need to get this worked out ASAP, if you still get a 1099R next January, it will help your case if the receiving custodian does NOT issue a 5498 because that will show the IRS that one of them is incorrect. Do you have a copy of these transfer papers?  You could also call the new custodian and ask them if anything about the transfer process indicates that a distribution was made.

Submitted by Ron Bernat on Sun, 2017-02-12 01:56

The firm is a large well-known brokerage firm whose wealth management division works with individuals and high net worth individuals.  No distribution has yet been made.  The assets are still sitting in cash in our deceased mother’s Traditional IRA account. The beneficiaries have set up inherited IRA accounts at other financial firms because the current firm does not want to open inherited IRA account for the beneficiaries.

Submitted by David Mertz on Sun, 2017-02-12 03:30

  • IRS Revenue Ruling 78-406 established that a trustee-to-trustee transfer of an IRA is neither a distribution nor a rollover.  With no distribution, there can be no Form 1099-R.  Movement of IRA funds to a beneficiary IRA for a non-spouse can only be done by trustee-to-trustee transfer since a distribution from an IRA to a non-spouse beneficiary is not eligible for rollover.
  • Are you sure that your mother’s account is an IRA?  If it is instead an account in a qualified retirement plan like a 401(k), the movement of money from your mother’s account to an inherited IRA *is* a distribution and rollover, but can only be done by direct rollover.  In that case, your description of the Form 1099-R is correct except that box 2b Taxable amount not determined would *not* be marked.

Submitted by Ron Bernat on Sun, 2017-02-12 15:47

My mother’s account statement shows “my mother’s name IRRA FBO my mother’s name”.  Would it read differently if it was a qualified retirement plan?So, if I understand correctly, based on IRS Revenue Ruling 78-406, whether the funds are transferred directly from my mother’s IRA to a non-spouse beneficiary/inherited IRA at the current firm/custodian or at a different firm/custodian (as is our case), it is neither a distribution nor a rollover and there would be no 1099-R issued by the delivering firm/custodian and no 5498 issued by the receiving firm/custodian?

Submitted by Alan - IRA critic on Sun, 2017-02-12 16:16

IRRA denotes an inherited retirement rollover account, which just means you inherited an IRA that your mother funded by rolling over a qualified plan like a 401k. For RMD purposes, it IS an inherited IRA. As long as your transfer papers are correctly completed  (be careful to avoid any box that show “distribution”), the only possibility I see for a 1099R is a foul up by the current custodian. This rarely happens at a “large brokerage firm”. Was someone told by this custodian that a 1099R will be issued, and why?

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