Inherited Roth IRA 1099r…

Submitted by Kevin Zoltek on Thu, 2020-02-06 13:31

I received a 1099r with a code “T”. I opened this account about 2 years ago from a friend who died. Are the RMD’s each year taxable? Should my 1099r have a code of “Q”?



Submitted by Alan - IRA critic on Thu, 2020-02-06 15:33

  • Many custodians will not use code Q at all. If your custodian would otherwise report it, the T code is due to the lack of documentation that the decedent first contribued to a Roth prior to 2015.  Now you must make an effort to determine if the 5 year holding period has been completed by working with the executor to see if any of decedent’s tax or Roth IRA records indicate that they had any Roth IRA account prior to 2015. If so, the distribution is qualified and you treat it as if the Q code was entered.
  • If the first contribution was less than 5 years ago, the chances are very good that your RMD is still non taxable because you will report the distribution using the Roth IRA ordering rules in which the regular or conversion contribution basis in the Roth comes out first. Determining what this basis is takes quite a bit more research unless the decedent kept good records. Most people do not. Have executor check decedent’s tax records to see if they took any Roth distribution in recent years. That is reported on Form 8606 if it is not qualified and that form will show the amount of basis decedent had prior to reporting that distribution. Another possible source of info is decedent’s tax preparer as the contribution history to Roth IRAs should be captured by preparer’s tax program. All you need is some assurance that decedent made their first Roth contribution (regular or conversion) prior to 2015. Once you secure that you are set. This is a one time hassle.

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