Father has $500k Trad IRA that includes $50k of non-deductible contributions (reported on several 8606s). Father dies. Is the beneficiary required to withdraw the funds pro-rata in order to avoid paying taxes again on the $50k?
To be clear, the Form 8606 used to do the pro-rata calculation on distributions from the inherited TIRA is separate from the Form 8606 for doing any pro-rata calculation for distributions from the beneficiary’s own TIRAs. The non-spouse beneficiary cannot apply the inherited basis to distributions from the beneficiary’s own TIRAs.
Permalink Submitted by Alan - IRA critic on Thu, 2020-12-24 03:07
Yes. The beneficiary inherits the unrecovered IRA basis of father, and will transfer it to line 2 of beneficiary’s 8606. The 8606 will pro rate each distribution to apply the remaining basis. If there is more than one beneficiary, the basis is assigned in proportion to the % inherited by the specific beneficiary.