Inherited IRAs and $5.43 Estate Tax Exemption
In 2015, how are distributions from a non-spousal inherited IRA affected by the 5.43 mil estate tax exemption? Let’s assume that the owner passes in 2015. If the total amount subject to estate tax is under the $5.43 threshold, do the beneficiaries still include the distributions from a beneficial ira in the personal income?
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-18 20:11
The beneficiaries will always report their distributions as taxable income in the year received. But if the decedent paid any federal estate tax, then the beneficiaries would have a potential misc itemized deduction for the amount of estate tax paid allocated to the value of the inherited IRA at death. This is called an IRD deduction and beneficiary would need to get info from the preparer of the 706 in order to make the rather complex calculation. Does no good unless the beneficiary can itemize.