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Who pays taxes? My moms estate inherited an IRA. I inherited said IRA thru moms estate. Does her estate pay the taxes for liquidating IRA or do I?
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Never trust tax advice from a bank. What the bank rep told you is incomplete and likely incorrect. If the amount of estate income is more than $600, yes, the income from the IRA distribution must be reported on the estate income tax return (Form 1041). However, because the income tax rates are generally higher than individual income tax rates, then income is typically distributed and passed through to the heirs on Schedules K-1 as Distributable Net Income with the estate taking a deduction for the Distributable Net Income (removing it from the estate's taxable income) and passing the tax liability through to the heirs. This is what the estate attorney is alluding to. It's likely that having the estate pay the taxes would only make sense if you were in a very high tax bracket yourself. You'll likely want to review this with a CPA who would likely prepare at least the estate's income tax return.