Who can make sense of the new Pub 590-B inherited IRA distribution rules?
Am I to understand that if the decedent was past his/her required beginning date and leaves the IRA to someone more than 10 years younger and not a spouse, that beneficiary has to still take out a minimum required distribution each year based on age but also has to empty it all within 10 years?
Page 12 example.
Finally, a respected authority (Wagner Law Group) put it in writing. They feel the IRS made an embarrassing (my take) error in the new Pub 590 B regarding annual RMDs within the 10 year rule. I tend to agree. Quote follows:
“If the new interpretation is intended and the IRS wants distributions to be taken annually, this would be an unusual attempt to narrow a statute through a publication, without the benefit of a regulation or other formal guidance such as an announcement, notice, FAQs (frequently asked questions) or a revenue procedure. Regulations, to be effective, require prior notice and the opportunity to present comments in writing and at a hearing. This is a time-consuming process but is generally expected if there is to be a change from the common understanding of the law. It is more likely, however, that the changes to Pub 590-B were made in error, during the haste of publication prior to the tax filing deadline, by an already over-burdened IRS staff.”
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-19 20:34
Agree, the beneficiary portion is a total mess. Undoubtedly will have to be revised. It does indicate that annual LE RMDs will have to be taken for the first 9 years of the 10 year rule, but even it that sticks it is probably more of an issue for inherited Roth IRAs since many beneficiaries would wait until the last year to take the distribution. For an inherited TIRA of a certain amount, many beneficiaries would want to take annual distributions anyway to avoid the tax hit in year 10.