Hello,

For someone who has an Inherited IRA and lives in the State of NJ, all RMDs (and any excess withdrawn) are subject to federal income tax in the year taken. However, because NJ does not allow for deductions for contributions to qualified retirement plans (all contributions to this Inherited IRA were made through a previous Money Purchase Pension Plan – and then rolled over into a Traditional IRA), all contributions should be exempt from taxation for NJ. The problem is determining the cost basis (contributions) made to the current Inherited IRA which, as noted above, had been a Money Purchase Pension Plan. How would you treat the RMDs for NJ income tax purposes to the extent the precise contributions are not able to be tracked down/located?

Separately, since the decedent was not subject to federal estate tax, no IRD could be taken (it could not be taken because of NJ estate tax incurred). Do any states allow IRD deductions or, as I believe this is, is it only available at the federal level in the event of federal estate tax owed? Thank you.

Jason