Spousal Roll over

Submitted by Michael Wargula on Thu, 2019-11-07 03:59

Wife (W) was sole beneficiary of husbands (H) IRA accounts. H died in 2017, age 68.2mos. W age 68.5. in 2017. W decided to continue H’s accounts in his and took no distributions until 2019 was she became 70 1/2. W’s RMD W for 2019 was calculated using Single Life Table. Now W wants to transfer account into her own IRA and use the Uniform Life Table which would stretch out the payment stream. When does W make this transfer ? at the end of 2019, or the beginning of 2020?

What would the 1099 code be for 2019? for 2020 ? Any Thoughts Appreciated. Thank you

Michael A. Wargula, Esq.
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Submitted by Alan - IRA critic on Thu, 2019-11-07 04:59

  • Turns out this is a complex question IF you are also asking whether the beneficiary distribution she took that will generate a 1099R coded 4 for 2019 can be partially rolled back if it was received in the last 60 days and she now elects to be treated as the IRA owner (spousal assumption).  Pub 590 B clearly states that a distribution to a spousal beneficiary can be rolled over to the spouse’s own IRA as long as that distribution is not an RMD. However, Reg 1.408-8 QA 5 also states that if the surviving spouse assumes ownership of the inherited IRA (after the year of death), she is treated as the owner the entire year and the RMD is calculated from the Uniform table. Therefore, an aggressive interpretation of the Reg would treat a portion of that prior distribution (the amount that exceeds the Uniform Table RMD) as an UNrequired distribution due to retroactive treatment as the owner. As such, if W assumes ownership before year end 2019 and the prior distribution was received in the last 60 days, she could roll a portion of it back into her IRA, subject to the one rollover limitation. The IRS never clearly closed this loop, as they seemed to have assumed the assumption would always be made before any other distribution was taken.
  • So W could make the assumption anytime she wishes, but needs to do do before year end if doing this rollover is desired.
  • Otherwise, if she makes the assumption in 2020, she will use the Uniform Table in 2020. The 1099R code for 2019 will be 4 because that distribution was made from an inherited IRA. The 2020 code will be 7 if she takes the Uniform Table RMD after completing the assumption and having the balance transferred to an owned IRA account.
  • There was a prior post about 10 days back with this same question and DMx and I opined that the beneficiary RMD already received could be partially rolled back.

Submitted by David Mertz on Thu, 2019-11-07 12:16

Also, beneficiary RMDs by W do not begin until the year *H* would have reached age 70½.  Knowing only that H reached age 68.2 at some point in 2017 is insufficient to determine whether H would have reached age 70½ in 2019 or instead in 2020.

Submitted by Alan - IRA critic on Thu, 2019-11-07 14:24

Yes, I noticed that possibility. It would make posts easier to accurately address if the actual DOD was posted and DOBs of the owner and beneficiaries were provided.

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