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.



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.

Thanks, the motivation was two-fold: 1. avoid kiddie tax for 2020 since the money is not needed. 2. The lack of RMD in 2020 will allow those funds to grow for another 70 years. (the projections of the money growth due to deferral are crazy)  Anyone else have any other thoughts on how to report on 1041?

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