Calculate the portion of the distribution that applies to the child and subtract that portion from the taxable portion of the CSF 1099-R.
Retain your calculation with your paper records that support your tax return should a tax authority have a question at a later time.
IRS Publication 721, page 26, states:
Surviving spouse with child
If the survivor benefits include both a life annuity for the surviving spouse and one or more temporary annuities for the retiree's children, the tax-free monthly amount that would otherwise apply to the life annuity must be allocated among the beneficiaries. To figure the tax-free monthly amount for each beneficiary, multiply it by a fraction. The numerator of the fraction is the beneficiary's monthly annuity, and the denominator of the fraction is the total of the monthly annuity payments to all the beneficiaries.
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