inherited ira-return of check
Cient asked broker on whether or not there were adverse tax consequences on the distribution of a inherited IRA to the beneficiary. Was told there were none.After receiving the check and before it was deposited client found out that
there would be taxes to pay on the ira distribution. Broker told client that it was to late to reverse the transaction.Client
then deposited check. Does client have any ability to reverse the transaction at this time-it’s presently within the
60 day period.
marty kaminsky
Permalink Submitted by [email protected] on Thu, 2010-03-25 17:44
Marty,
Is your client the spouse of the decedent? Only a spouse beneficiary may do a 60-day rollover of IRA assets they inherit. So if the beneficiary was the spouse you are in luck. Just make sure to complete the rollover within the 60-days.
If not, and the beneficary is anyone but the spouse, your client is going to be stuck with the tax bill. A non-spouse beneficiary can never do a 60-day rollover. The second that money was distributed from the account, it was taxable – with no real fix. Had your client not deposited the check, its POSSIBLE that the custodian could have said it was an error on their part and reissued a check in the name of the beneficiary’s inherited IRA – which could have been deposited into a properly titled inherited IRA with no adverse tax consequences. But now, with the client taking control of the funds and putting them in his or her own account, it’s pretty much a done deal. Even a PLR would be useless in this case, as the IRS can’t extend a deadline for something the taxpayer couldn’t do to begin with.