Estate Taxes
When doing a Roth conversion and paying the taxes from an account other than the IRA one would be getting the taxes they pay out of their estate for estate tax purposes. If one does the Roth conversion in January of 2010 and will have 1/2 the income reportable in 2011 and 1/2 in 2012 but dies in 2010 are the taxes that are due still considered out of the estate for estate tax purposes?
Thanks.
Permalink Submitted by Steve Glasgow on Sun, 2009-09-27 20:05
Great question? I would hope so but don’t know?
Permalink Submitted by Clyde Wolf on Sun, 2009-09-27 20:27
Since this IRA owner died in 2010, why not pay the conversion tax with the 2010 tax return?
The executor should be able to make the choice of payingthe tax in 2010 or splitting this tax 50/50 in 2011 and 2010.
Permalink Submitted by mk foss on Sun, 2009-09-27 23:15
There is a deduction on the estate tax return for all liabilites owed as of the date of death. If someone died after the conversion and before the taxes were paid, the taxes would be deductible on the estate tax return. If they hadn’t been paid yet, the tax could be estimated for purposes of filing the estate tax return. If the tax turns out to be higher than the estimate, the estate tax return (Form 706) can be amended.
Permalink Submitted by Alan Spross on Mon, 2009-09-28 05:41
For any 2010 conversion, any income that would have been deferred to 2011 or 2012 must be reported on the final income tax return for the decedent of the year of death. This applies to a final joint return as well with respect to the deceased spouse. The executor has no option to extend tax payment. This goes back to TIPRA in 2005, which included the 2010 Roth conversion changes.
Permalink Submitted by Bruce Steiner on Tue, 2009-09-29 02:22
Alan is correct. Section 408A(d)(3)(E)(ii)(I) (as scheduled to be in effect in 2010).
Section 408A(d)(3)(E)(ii)(II) (as scheduled to be in effect in 2010) contains an exception whereby if the converted Roth IRA passes to the surviving spouse, he/she may elect to include the remaining amounts in his/her income for the year(s) in which they would have been taxable to the deceased spouse if he/she had not died.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL