IRA taxable event

Submitted by Brian Carenza on Tue, 2023-10-17 16:57

non spouse beneficiary received a check for 250k made payable to her only, she created a inherited IRA account, check was cashed and deposited into inherited IRA account. Knowing that her 60 day rollover does not apply and 250k funds are subject to income tax for 2023, what recourse, if any, may she have to minimize the tax bill?



Submitted by David Mertz on Tue, 2023-10-17 17:10

  • The $250k is taxable on her tax return.  To avoid a 10% excess-contribution penalty each year until corrected, she’ll need to obtain a return of contribution from the IRA into which the deposit was made.  Anything she could do to reduce taxable income on her 2023 tax return would be independent of this taxable distribution.
  • Note that the IRA custodian erred in allowing this deposit to be made to an inherited IRA at all, considering that the money was coming from the client and not paid to the inherited IRA directly from the original retirement account provider.

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