Who reports the RMD when decedent passes before the sale described below.

Submitted by Joe Marchbein on Thu, 2022-12-08 17:44

The taxpayer died on Sunday, 11/20/22. On Friday, 11/18/22, at 9:57pm. an order was placed to sell stock in an IRA as the RMD. The investment company sold the shares on Monday, 11/21/22. and deposited the funds in a bank account held jointly in the name of the deceased and his son.
Is the income reported on the decedent’s return or in that of the 3 beneficiaries.
My thought is the amount is reported by the beneficiaries since the stock sale was made after the passing of the decedent .



Submitted by Alan - IRA critic on Thu, 2022-12-08 19:32

  • The custodian is going to report this distribution on a 1099R for the decedent even if they receive the death cert before year end, but technically the decedent’s final return should use the nominee process to transfer the reportable income to the 3 IRA beneficiaries, who are entitled to these funds as beneficiaries. The son named on the joint bank account should write a check to the other two beneficiaries for their share of the distribution. 
  • However, while not technically correct, it is much easier to report the 1099R as issued on the decedent’s final return as that avoids the nominee process that will involve 4 taxpayers. Either way, the year of death RMD has been completed, which is what the IRS is most concerned about. 
  • This could also affect estate tax returns if they are required.
  • If this was the case here, deathbed distributions just to meet the RMD should be avoided because situations like this present additional hassles for beneficiaries compared to just completing the year of death RMD once beneficiary IRAs are established. Further, the IRS is now allowing the year of death RMD to be completed up to the filing due date plus extensions, which removes the pressure of year end distributions for late year deaths. 

Submitted by Jay Wiedwald on Fri, 2022-12-09 08:00

It seems to me that Alan’s first bullet (nominating the beneficiaries for the benefits) is complicated by the fact that taxes were very likely withheld from the distribution and credited to the decedent’s SSN. I’m not a tax pro but I don’t know of any way to “nominate” some one else to get credit for the taxes withheld, and the beneficiaries would be responsible for those taxes. 

Submitted by William Tuttle on Fri, 2022-12-09 13:24

Withholding simply increases taxes paid. The nominee process accurately reflects reduced tax liability. In these facts and circumstances, any withholding will reduce any taxes owed or increase any refund as applicable.

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