How to Report an Inherited IRA Trust RMD on 1041 then Rollover due to CARES ACT on Trust Return
My Question is: – How to Report an Inherited IRA Trust RMD on 1041 then Rollover due to CARES ACT on Trust Return
Background:
We created IRA trusts for my father’s grandkids. When he passed in 2014, individual Inherited IRA trust accounts were created for each grandkid due to the see-through nature.
We took an IRA RMD distribution from the traditional Inherited IRA in Jan 2020. As a result of the CARES ACT, we returned/rolled over the exact amount back into the same inherited IRA in July.
I just received the the1099-R for each of the grandkid’s trusts. They show the RMD as a distribution but make no mention of the rollover. Vanguard advised that they will also send a form 5498 in May showing the rollover BUT it is not required for the tax return and we should show the rollover on the federal taxes. (yes, I know IRS will reconcile it later)
For personal returns, on form1040, it is pretty easy/clear. There is this article from Ed and also numerous discussions on this forum.
https://www.investmentnews.com/what-clients-wont-see-this-years-1099-r-form-202192
Since it is an Inherited IRA Trust with a 1041 federal form. I have to include the RMD amount. I however do not see a place to show a rollover on the trust return (1041). Currently, the RMD is reported on line 8 under “other income.”
What is the correct way to show this RMD as rolled over/non-taxable/ $0 on the K1 that gets issued?
Thanks in advance.
Permalink Submitted by Alan - IRA critic on Fri, 2021-02-05 04:36
There probably are no reporting instructions for this scenario since until 2020, distributions made from a non spouse inherited IRA could not be rolled over. I think I would show the 1099R distribution on line 8, then immediately show the same amount next to line 8 as a negative with a notation about the rollover allowed per Notice 2020-51. This erases the distribution and a K 1 should not be issued since there is no income passed through to the grandkids. Perhaps this avoids the kiddie tax for a year.