jazz47
New Member

I inherited a traditional IRA from my deceased spouse. This IRA has non-deductible contribution. I also have a non-deductible contribution to traditional IRA.

Can I add these two amount together and track in form 8606?  Currently I only take RMD from my inherited IRA.  How should I report the non-taxable IRA amount?

Retirement tax questions

You have the option to keep the inherited IRA in the name of your deceased spouse, in which case the non-deductible basis must be tracked on a separate 8606 form that cannot be prepared by TurboTax - you must download the 8606 from the IRS and manually complete and mail it for the inherited IRA.

You also had, or have, the option to treat the IRA as your own as surviving spouse and have the trustee of the IRA  put it in your name or do a trustee-to-trustee transfer (not a rollover) into your own IRA.  Then you would track all the basis on a single 8606 form.   Your RMD would also be based on you and not your spouse.

See:IRS Pub 590B
https://www.irs.gov/publications/p590b/ch01.html#en_US_2016_publink1000230753

Surviving spouse.   If you are the surviving spouse who is the sole beneficiary of your deceased spouse's IRA, you may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you were the owner beginning with the year you elect or are deemed to be the owner. For details, see Inherited from spouse under What if You Inherit an IRA?, earlier in this chapter.


**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Retirement tax questions

I  inherited  a traditional  IRA from my deceased spouse with a nondeductible basis and I did a spousal rollover into my traditional IRA which has a nondeductible basis.  Since I comingled the assets I combined  both nondeductible basis together.  Can I just file one Form 8606? 

dmertz
Level 15

Retirement tax questions

If the assets have been comingled, the inherited IRA is no longer an inherited IRA but is instead now an IRA owned by the surviving spouse and all distributions, basis and year-end values would go on the surviving spouse's Form 8606 that can be prepared by TurboTax.

TaxiQs
New Member

Retirement tax questions

My husband passed away and I rolled his IRA into mine and we both had after tax basis. He had taken distributions prior to his death. Can I use all of his after tax basis with regard to his distributions in the current filing for 2021 or am I required to combine our after tax basis amounts for my distributions in 2021? It saves a significant amount if I use all his basis in 2021 against his distributions.

DaveF1006
Expert Alumni

Retirement tax questions

It depends. Since you elected to rollover the inherited IRA into yours, you became the sole owner of both IRA's combined. It is now one IRA owned by you and you must use the combined after tax basis that is available.

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TaxiQs
New Member

Retirement tax questions

Thanks for the response. I'm asking the question because we both took distributions individually before he passed away so I was filing an 8606 for each of us to determine taxability of his. Turbo tax initially took all his basis against his distribution since he has no account balance at the end of the tax year, the full balance is mine. Doing that seemed odd so I transferred his basis to mine and the taxes went up over 2K which got my attention. I know I'm stretching this, but there are some different rules regarding basis when it is a spouse compared to non-spouse and the word "can" is used instead of must so I hoped it left the door open for possibly taking the full basis in year of death.

DaveF1006
Expert Alumni

Retirement tax questions

Yes, this is a consequence when you elected to roll his IRA into your own. For further information, please read the IRS publication 590 for additional details.

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