Here is the simple answer why you are being taxed for this money you received from an estate. You received a 1099-r for this money because the money came from the deceased ira account. This money has never been reported as income until it is distributed..ie to the person who owns it receiving monthly checks or the beneficiary who receives it as an inheritance. Once this person passes, it is distributed to the beneficiaries and is considered taxable at this point. The only way to not pay any taxes now is to reinvest 100% of the amount on the 1099-r in an ira. A rollover. I wish I would have known this before I did my taxes!
