Non-taxable portion of RMD for deceased spouse

Forum|Forum|6 years ago
February 6, 2020
6 replies
49 views

My spouse had non-deductible contributions in his Traditional IRA. He withdrew his 2019 RMD prior to his death. By year end 2019 all his IRAs had been transferred to my IRA so their balance was $0. Since the non-taxable portion of the RMD is based on the percentage of the cost basis relative to the MV on 12/31/2019, how do I calculate this? Form 8606-T, line 6 is zero, despite there being a non-zero number on line 2.

Best answer by dmertz

is there a 8606 in your return that reports all of his non-deductible contributions? This is the only way that IRS and Turbo Tax knows there were non-deductible contributions made in the past. First go to tax tools>tools>delete a form> here you will verify if a 8606 is listed. If it is not, then you need to follow these steps to generate a 8606.

If you never had an 8606 generated in your return, you need to do the following.

1) go to federal>deductions and credits>all tax breaks>Traditional and Roth IRA Contributions

2) Navigate through the questions until it asks if if you made non-deductible contributions, here you will say "yes"

3) then if you made a contribution in 2019 you will say yes or no

4) Navigate through the interview to where it asks if Any Nondeductible Contributions to Your IRA? here you will say yes

5) The Next screen says Let's find your IRA basis Type in total basis as of Dec 31,2018 and enter what the basis amount is.

6) After the process is complete, you will have a 8606 generated, that reflects your prior year's basis plus this years if you made a non-deductible contribution again this year.

if you need further help, please reach out to phone support to guide you through this process. Please keep in mind, you will need to find out what his basis is for all of his non-deductible contributions. These are usually issued on a 5498 that the trustee will send to you or if not, you will need to contact the trustee to get the basis information.

The custodian should have issued (or will issue) two Forms 5498, one sent to the executor of his estate showing the FMV on the date of date of death and another to you for the account to which the inherited IRA was moved. I would use his total basis and date of death FMV on his Form 8606.

If you also took a distribution in 2019, whatever amount appears on line 14 of his Form 8606 becomes an adjustment to your basis on line 2 of your Form 8606. To enter your basis adjustment, click the EasyGuide button after indicating that you yourself have made nondeductible traditional IRA contributions, mark the box indicating you inherited an IRA before 2019 from a spouse who died (even though you inherited this IRA in 2019), then enter the amount from his line 14 and provide explanation. If you did not receive a traditional IRA distribution in 2019, you would make this adjustment on the Form 8606 for the next year that you do receive a distribution from your traditional IRAs.

AmyC

Level 15

His basis remains with his IRA money, even though you moved it around.

When you inherit from your spouse, you have 3 options.

The IRS says in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

If you inherit a traditional IRA from your spouse, you generally have the following three choices. You can:

Treat it as your own IRA by designating yourself as the account owner.
Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a:
1. Qualified employer plan,
2. Qualified employee annuity plan (section 403(a) plan),
3. Tax-sheltered annuity plan (section 403(b) plan),
4. Deferred compensation plan of a state or local government (section 457 plan), or
Treat yourself as the beneficiary rather than treating the IRA as your own.

This leads to:

IRA with basis.

If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible contributions, that basis remains with the IRA. Unless you are the decedent's spouse and choose to treat the IRA as your own, you can't combine this basis with any basis you have in your own traditional IRA(s) or any basis in traditional IRA(s) you inherited from other decedents. If you take distributions from both an inherited IRA and your IRA, and each has basis, you must complete separate Forms 8606 to determine the taxable and nontaxable portions of those distributions.

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L

Lisa3588Author

Level 5

Yes - I know how to handle the IRA money, what I need is information on to enter the info in TT.

As I said, his MV is $0. How does TT calculate the non-taxable portion? The 1099-R has his SSN and the end of year MV have my SSN.

DaveF1006