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New Member
posted Jun 6, 2019 12:05:52 AM

Could someone please explain the question "Did you inherit this IRA from <Insert Financial institution>"?

Could someone please explain the question "Did you inherit this IRA from <Insert Financial institution>"?  My mom passed away late last year and I have a few 1099-r from her retirement accounts where the assets were either transferred directly into an inherited IRA at another institution or where I opted to take the cash amount offered.   I just have a code 4 in box 7 on both of these (I am trying to get a corrected 1099-r for one that should be considered a direct rollover.

If I say "yes" to the question about inheriting the IRA (I can't remember if it is an annuity that had not started paying out yet), it then asks if I am the spouse or not and then charges me the tax on the full amount. It does not ask me what I did with the money unless I say "no". That is the only time I am given the option to say I did a direct rollover or cash out.

0 3 2359
3 Replies
New Member
Jun 6, 2019 12:05:53 AM

To be more specific, I am curious what in what circumstances a person answers "yes" or "no" to the question. I am not concerned at the moment with the one I am trying to get corrected (as the company is reviewing my request), but I don't know what a person is supposed to select for imputing the other which I selected to just receive cash for on my claim packet. (Which I fully understand I will be taxed on the full amount and had taxes withheld at the time. )If I select "yes" just because I inherited the account (regardless of the type of account) then when would a person select "no" if you had a code 4?

Level 15
Jun 6, 2019 12:05:54 AM

Never.  I don't know why TurboTax bothers to ask the question when the code 4 in box 7 already supplies the answer and is what the IRS goes by.

The only case where the question makes sense is for a distribution from a Roth IRA.  The code in box 7 for a distribution from a Roth IRA can't be used to distinguish between a distribution from an owed Roth IRA and a distribution from an inherited Roth IRA if the recipient of the distribution was age 59½ or over at the time of the distribution.  (Code T or Q is used in both cases.)

Level 15
Jun 6, 2019 12:05:55 AM

For 2018, the developer mangled the wording of this question.  It's actually asking, "Did you inherit this IRA which is held by <Insert Financial Institution> as custodian?"

If the assets were transferred directly into an inherited IRA, trustee-to-trustee, there should have been no code 4 Form 1099-R issued.  A trustee-to-trustee transfer is neither a distribution nor a rollover.  A code 4 Form 1099-R instead implies that there was a distribution paid to you and, as a non-spouse beneficiary you are not permitted to roll the money over to another account.  TurboTax knows this so it will not offer you the opportunity to report it as rolled over.

If this truly was a trustee-to-trustee transfer, you must get the custodian of your mother's IRA to correct the code 4 Form 1099-R so show $0 distributed.  If the custodian refuses, you'll have to file a substitute Form 1099-R (Form 4852) showing $0 in boxes 1 and 2a in place of the amounts reported by your mother's IRA custodian.