Deductions & credits
@lshel thank you very much for your super-organized and cogent replies and questions.
@jtax, you said:
How do I add the amounts shown as remaining Basis in last year's 8606. I expected TT to do that automatically, but it didn't (perhaps because I told TT that it was an inherited IRA).
Also, please clarify what you meant by "and tell TT about it when asked." Tell TT about what?
Yes, telling TT it was inherited could be the issue. I don't think TT knows enough to "move" your wife's basis to your IRA. TT does ask if you inherited the IRA from your spouse, but if you answer that yes it doesn't seem to do anything with your spouse's 8606 basis. I'm not sure what else it does if you answer that yes.
What I might suggest is to answer no to the inherited question. I think that is okay because it is now your IRA. There are special rules for inherited IRA's that do not apply to spouses who roll it over in their own name.
Below is the screen show flow to get you to where you enter your wife's basis. (Actually add it to your own. I'm guessing your own is zero.) If you get to the last page shown below and enter your basis, it should show up on your 8606 and you should see the calcs in 8606 part one reducing the taxable amount of the distribution (line 13 subtracted the total distributions amounts).
You may also have a 8606 for your wife in the final return. If you are adept at forms mode you could remove it. But I wouldn't worry about it as long as there no 1099-R's in your wife's name/SSN in 2021 because it won't do anything and shouldn't carry forward to next year when you won't be filing a joint return. Just don't be confused next year and double your basis. TT should track your basis from your 8606 line 14 of the prior year. If it does so it will fill in the amount on the last screen below. You can always correct it if it is missing or wrong so always be on the lookout for that not happening and in that case you can type in the prior year 8606 line 14 yourself. (Or if you use a tax-preparer or something else.)
If that doesn't make sense, please ask again. Thank you for your patience.
