I have a Traditional IRA that has a basis. The last nondeductible contribution was made in 2019 for which I filed a Form 8606. Being age 70, I am not receiving any distributions from it. In addition, I have an Inherited Traditional IRA that came from my father with no basis, from which I am taking the RMD.
Pub 590B (chapter 1, page 6) has a paragraph on "IRA with basis". It says that if the Inherited Traditional IRA had a basis, I could not combine that basis with any basis that I had on my own Traditional IRA, and I would have to "complete separate Forms 8606 to determine the taxable and nontaxable portions of those distributions". I have interpreted this in the past to mean that I had to treat my Traditional IRA separate from the Inherited Traditional IRA. In short, I could not file a Form 8606 to use the basis of my Traditional IRA to offset the RMD that I take on the Inherited Traditional IRA, which has no basis.
In the Instructions for Form 8606, under "Who Must File", the second reason says: "You received distributions from a Traditional, SEP, or SIMPLE IRA in 2022 and your basis in these IRAs is more than zero" (not my case, no distributions). Another reason to file would be that "you received a distribution from an Inherited Traditional, SEP, or SIMPLE IRA that has a basis -", mentioning that you might have to file more than one Form 8606 (again not my case, no basis). So my interpretation of “Who Must File” is that I do not have to file a Form 8606.
TurboTax is unclear on this “basis” scenario of an Inherited Traditional IRA versus a Traditional IRA. It seems to lead me into filing a Form 8606, using the basis on my Traditional IRA to offset the RMD of my Inherited Traditional IRA which has no basis. My instinct is to treat the two IRAs separately, and not file a Form 8606 until I take my first RMD at age 72 from my Traditional IRA. And when I do file, on line 6 where you are to "enter the value of all your traditional" IRAs, I will only include the value of my Traditional IRA which has a basis, and not include the value of the Inherited Traditional IRA which does not have a basis.
I apologize for the long explanation - I hope it makes sense. Any suggestions?
