The beneficiary is responsible for tracking any basis in nondeductible traditional IRA contributions in the inherited IRA. The beneficiary would need to obtain the basis information from the executor or personal representative of the decedent's estate. The beneficiary must use a Form 8606 outside of TurboTax to calculate the nontaxable and taxable amounts of the distributions made during the year, then enter the taxable amount into TurboTax. The Form 8606 prepared outside of TurboTax should be included with the printed and mailed tax return. The remaining basis shown on line 14 of this Form 8606 will carry forward to line 2 of the next year's Form 8606 prepared outside of TurboTax.
If the beneficiary is the surviving spouse of the decedent and the surviving spouse transfers the inherited IRA to their own IRA or assumes ownership of the IRA, the basis becomes the surviving spouse's own basis. In TurboTax you would indicate to TurboTax that you made nondeductible traditional IRA contributions, then click the EasyGuide button and TurboTax will allow you to indicate the amount of basis inherited from the deceased spouse.
