RMD reported on 1041

Submitted by Cheryl Altieri on Tue, 2017-04-11 12:39

Mother requested 2016 RMD 9/3/16, died 9/23/16, we received RMD check 9/29/16. Which return reports this income? Deceased’s final 1040 or trust’s 1041?



Submitted by Alan - IRA critic on Tue, 2017-04-11 15:46

Assuming that the 1099R was issued to Mother and the trust was the named IRA beneficiary, the distribution should be both reported and backed out of Mother’s final return using nominee process and then reported on the 1041 for the trust. The trust became responsible for  completing Mother’s year of death RMD that was not distributed in time.

Submitted by Cheryl Altieri on Wed, 2017-04-12 01:42

Yes the 1099R was issued to mother, however her 5 children were the beneficiaries at 20% each with the trust as a contingent beneficiary for several different ira accounts. Both traditional and roth.The RMD was distributed before the end of the year in her year of death, so that is on time as far as RMD calculations and penalties, Right?  But since it was received after her date of death, that is why it needs to be handled as a nominee distribution? Please tell me that the trust can report it on the 1041 and not the 5 beneficiaries on their 1040s.By the way, thank you.  I appreciate the swiftness of your response, as I am sure this is a busy time for you.

Submitted by Alan - IRA critic on Wed, 2017-04-12 02:43

  • That changes things. I assume the children are not going to disclaim their 20% interests. Last fall, the check should have been returned to the custodian with the death certificate and been reissued as 5 checks to respective beneficiaries. That was not done, so the nominee process is the only choice left, except that each beneficiary needs to report 20% of that distribution on their 2016 returns. This takes care of the year of death RMD. End result is that each beneficiary receives their share and each beneficiary is taxed on that distribution on their own returns.
  • At this point the trust did not inherit anything as a contingent beneficiary unless disclaimers will be filed by selective beneficiaries, and that would just complicate the situation. This distribution should not have been deposited into the trust since the trust did not inherit the account. Besides, trust tax rates are generally higher than individuals unless the trust income is very small.

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