Roth beneficiary
Roth beneficiary (52) wants to take distributions out over 5 -6 years to gift to niece and nephew to pay for college. Will there be a penalty and how are gains versus the basis figured out for taxes?
Roth beneficiary (52) wants to take distributions out over 5 -6 years to gift to niece and nephew to pay for college. Will there be a penalty and how are gains versus the basis figured out for taxes?
Permalink Submitted by Alan Spross on Fri, 2009-01-23 22:47
The first information to determine is the year the decedent first contributed to a Roth IRA. If it was 2004 or earlier, the account is fully qualified and there is no need to calculate the basis.
However, if the first contribution was later, then the breakdown will be needed to determine the amount that can come out before earnings are tapped and produce taxable income. Any earnings come out last and therefore there is a good chance that by the time earnings were tapped, the 5 year requirement could be met.
To determine the needed info, check with the tax preparer of the decedent, the executor or whoever has custody of decedent’s recent tax records. If the info is not there, the IRA custodian may be able to help piece it together. If still no luck, IRS records of Form 5498 showing contributions would contain the information and could be requested.