2 Inherited IRAs = 2 Form 8606?
I have two inherited IRAs that contain non-deductible contributions.
The first was from my father and I’ve used Form 8606 for a couple years to figure what portion is non-taxable. That part is pretty easy.
But the year after our father’s death my brother (who inherited a portion of our late father’s IRA) died as well and I had to take my first MRD in 2007 from a second traditional IRA (which was originally owned by our father, but passed to me as one of my brother’s beneficiaries; another brother got the other half of that IRA).
On line 6 of Form 8606 it tells me to “Enter the value of all your traditional, SEP, and Simple IRAs as of December 31, 2007…” I notice on that form they put “all” in bold print as if it might be important.
Despite their wording, I assume I have to file two separate 8606 forms, since one IRA is directly from my father and the other is indirectly from my father having first been inherited by my brother and then inherited by me. The instructions for 8606 are of no help, since apparently having multiple inherited IRAs is an uncommon situation they don’t bother to provide instruction on.
Thanks in advance for any help.
Permalink Submitted by Alan Spross on Thu, 2008-03-27 20:04
Good question, and I agree with your conclusion. The limited IRS reference to this situation is on p 21 of Pub 590, and that does not address all the possible issues either.
I would be inclined to play it safe and maintain the two separate 8606 forms for each IRA that are not considered combinable. While these two IRAs originated from the same owner, the IRS has not clearly defined who they mean by inherited from the “same decedent”. In addition, these IRAs probably have different registrations since your most recent IRA may include reference to your brother as well as your father on the registration. There will be different RMD divisors on these accounts as well unless your brother is the same age as you are.
While I know of no reference, and there is probably little difference in your case, it is not logical that someone could aggregate basis between an IRA with a small RMD requirement and one with a large one in order to recover the basis faster.