Taxes on Inherited Roth IRA
Hello,
I recently became the non-spouse owner of a Beneficiary Roth IRA (4/8/2021). The account consists of stocks and mutual funds, with very little cash. Unfortunately, I need to sell the stocks and mutual funds and take a lump-sum distribution. My question is will i owe any taxes on this distribution? I realize that selling the assets and keeping them in the account does not generate income tax, but I don’t know how this applies to Roths in regards to stocks/mutual funds and distributions. The deceased created the Roth IRA in tax year 2016 and, if it matters. passed away 6-20-2020. Thanks for any help you can provide.
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-13 22:56
Since the decedent’s first Roth contribution was in 2016, at the end of 2020 the 5 year holding period was met, and because the owner had passed, the Roth became fully qualified on 1/1/21. That means you could withdraw the entire inherited Roth balance tax free.