Covid eligible CRD from Inherited IRA

Submitted by Terry Ford on Thu, 2020-10-15 15:06

I have a question from a client of mine who is Covid eligible for a distribution. I know he can take a distribution from a traditional IRA. Under the CARES Act, can he take a temporary CRD from his Inherited IRA and redeposit it within three years?



Submitted by Alan - IRA critic on Thu, 2020-10-15 18:26

I don’t see why not, since the repayment is treated as a non reportable transfer. Of course, inherited IRA distributions are penalty free anyway, so the only purpose of taking a CRD would be a temporary loan if repayment is planned. Such a CRD  would also mess with beneficiary RMD calculations since if repaid in essence it would be an outstanding rollover or transfer to be included in various year end balances.

Submitted by David Mertz on Thu, 2020-10-15 21:18

  • IRS Notice 2020-50 Section 1.D makes it explicit that a CRD paid to a non-spouse beneficiary is not permitted to be recontributed:  “Any coronavirus-related distribution (whether from an employer retirement plan or an IRA) paid to a qualified individual as a beneficiary of an employee or IRA owner (other than the surviving spouse of the employee or IRA owner) cannot be recontributed.”  https://www.irs.gov/pub/irs-drop/n-20-50.pdf
  • The only benefit that results from treating as a CRD a distribution from an inherited IRA maintained for a non-spouse beneficiary is that the income can be spread evenly over 2020, 2021 and 2022 rather than it all being taxable on teh 2020 tax return.

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