1099–R Question

Submitted by Kevin O'Hearn on Tue, 2020-03-24 02:32

Hello, I’m working with a house account that inherited an IRA from their aunt in 2019. We opened up an IRA BDA and move the funds over and the house account did a full distribution in December. 1099-R is code correctly and in box 7 it has code 4 and an X to say it’s from an IRA. Client’s accountant is saying this distribution is taxable and I told the client that since it is coded as a “death distribution” they will not be taxed on it.

I’m not a tax advisor but can you add any feedback I could pass along to the house account or any online resources the client could refer too? The distribution was for about $27,500.00 and the accountant is saying the full amount is subject to tax.

Any guidance would be greatly appreciated. Thank you.



Submitted by tomd37 on Tue, 2020-03-24 03:05

My understanding is that the code 4 in box 7 represents income earned by a deceased person before death, however was not paid out until after death.  I believe the income is taxable to the recipient based on the amount in box 2a.  That is my understanding, which may be incorrect, so let’s see what others have to say.  Was there an amount in boxes 1 and/or 2a?  

Submitted by Kevin O'Hearn on Tue, 2020-03-24 12:59

Thank you. There is a taxable amount in box 2a but my custodian will always check off box 2b that says the taxable amount is not determined.

Submitted by David Mertz on Tue, 2020-03-24 17:00

Unless the aunt made nondeductible contributions to her traditional IRA, the entire amount distributed to the beneficiary, reported on the code 4 Form 1099-R, is taxable.

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