Hi,
I have a very similar problem to tdn1. I initiated a trustee-to-trustee transfer of an inherited IRA. Publication 590-A says this in the "Inherited From Someone Other Than Spouse" section.
"If you inherit a traditional IRA from anyone other than your deceased spouse, you can’t treat the inherited IRA as your own. This means that you can’t make any contributions to the IRA. It also means you can’t roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. See Pub. 590-B for more information."
The receiving IRA is set up in the name of the deceased IRA owner for the benefit of me as the beneficiary. The problem is the sending institution issued me a 1099-R marked as follows.
Box 1 gross distribution: full amount specified
Box 2a taxable amount: full amount specified
2b: X mark
total distribution: X mark
Boxes 3, 4, 5 and 6: blank or zero
Box 7: 4 (death)
IRA / SEP / Simple: X mark
All state boxes (with the exception of the state code) blank
TurboTax treats this as a taxable distribution and does not provide any option to say "this 1099-R represents a trustee-to-trustee transfer of an inherited IRA" which should result in the box 1 or box 2a amounts being treated as non-taxable. This is not a "rollover" but a trustee-to-trustee transfer to an IRA specifically set up to be an inherited IRA.
I have the statement from the receiving institution saying a direct transfer (not a rollover,) for the full amount took place but don't yet have a form 5498 from them as that won't be available till May.
If I enter the 1099-R as-is I'm liable for tax on the full amount (sitting in a beneficiary IRA.) Don't enter the 1099 and, if and when the IRS asks, provide them with the story and supporting documentation? Enter a "corrected" 1099 but how? If I leave the IRA/SEP/Simple box X any amount in box 1 or 2a is taxable. Enter a corrected 1099 with zero amounts in 1 and 2a? Suck it up and get the money out of the IRA before the deadline and pay the tax at a fairly high marginal rate?
Can TurboTax be changed to recognize the type of transfer described in 590-B?
Thank you
