I'm working on the 1041 using estimated (anticipated) Line 8 income, which I presume I will be describing as "IRA-BDA Distributions".
Line 1 asks for Interest income. As this Estate IRA-BDA has been parked in Fidelity, I have basis (from the day the Trad IRA was converted to BDA) and I can see the closing value on 12/31/24. The gain will be reported as 2024 interest (from Fidelity's SPAXX MM fund).
Regarding Income reporting of the Estate IRA-BDA, I would appreciate clarification that I am reporting ONLY income induced by distributions necessary to pay Estate expenses. I am NOT reporting the value of the ENTIRE IRA-BDA.
If that assumption is correct, looking forward, after the Estate IRA is distributed to the five beneficiaries, how will these 20% portions become reportable on each beneficiary's 1040?
Mocking up an easy hypothetical, assuming $500k Estate divided 5 ways into the 5-year rule for distributions, assuming 20% distributed each year: Each beneficiary will be adding $20k to their existing income via their IRA-BDA withdrawal. The initial 1099-R documenting the individual beneficiary distribution will reflect $100k gross with $0 taxable... (because it's similar to an in-kind transfer with no tax implications until the beneficiary creates the withdrawal?).
I've read other posts within this forum in which some are populating 1041 Line 8 with the FULL value of their IRA-BDA. I don't want to belabor you with articulating all the differences. Main objecctive at this moment is to verify that, amidst my circumstances (Estate distributions to pay obligatory estate expense) I will ONLY be reporting the distributions as income, not the full value of Estate IRA.
My hat is off to you dmertz, in respect to the depth of your knowledge. Amidst the depth of these details, I'm now recognizing it may be wise to allow a professional to complete these Estate aspects. The 1041 doesn't initially appear nearly as challenging as it is evolving to be. IRS instructions are vague and seemingly presumptive - as if to suggest that if the presumptions aren't known, perhaps I should not be moving forward as DIY on this one. Meanwhile, I will dig in to learn and absorb more.
