Beneficiary Roth IRA Distribution Question
Roth IRA
A son makes a Roth contribution to his employer sponsored 401k plan five years ago.
The son passes away in 2021 before turning 59 1/2 and his 58 year old mother inherits the $4400 in the plan.
She meets with her financial advisor who opens a beneficiary Roth IRA in 2022 and she requests to rollover the proceeds to the new Beneficiary Roth IRA.
The $4400 was never invested and there was not growth.
In 2023 she tells her advisor that she needs money and the advisor does a distribution for the full amount.
Is the distribution fully taxable?
Permalink Submitted by Alan - IRA critic on Wed, 2024-04-03 03:41
No. If the son’s first Roth 401k distribution was prior to 2019, the 5 year holding period was completed prior to the 2023 distribution. In that case, the entire inherited Roth distribution would be non taxable and treated as regular Roth IRA contribution basis on line 22 of Form 8606 filed by mother for 2023.
If the 5 years was not completed, then only the Roth 401k contribution basis shown in Box 5 of the 2022 1099R will be non taxable. Amounts in excess would be taxable as computed on the 2023 8606.