Double-taxed Nondeductible RMDs from Estate IRA
cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 2

Double-taxed Nondeductible RMDs from Estate IRA

When my Father passed in 2019, his traditional IRA had nondeductible & deductible parts and the deductible parts were tracked by Forms 8606 before he passed. His IRA was inherited by his trust, and the annual RMDs from this IRA now go to beneficiaries via Forms K-1. However, when using TurboTax to file my Father's final return, and his estate return, there is no option to include Form 8606 or to otherwise address the nondeductible portion of his IRA.

 

How can the beneficiaries avoid double-taxes by paying taxes on the nondeductible portions of their inherited RMDs when they receive them from the estate?

5 Replies
Highlighted
Level 15

Double-taxed Nondeductible RMDs from Estate IRA

Only the taxable amount gets reported on Form 1041 line 8 and only the taxable amount gets passed through to the beneficiaries on Schedule K-1 (Form 1041).  Use Form 8606 for the estate or trust (whichever is the beneficiary of the IRA, you've variously indicated one or the other is the beneficiary) as you would for an individual and indicate the TIN of the estate on the form.

Highlighted
Level 2

Double-taxed Nondeductible RMDs from Estate IRA

Yes, that probably makes the best sense - except I'm not sure Form 8606 can be attached to Form 1041, since the top of the 2019 Form 8606 includes the statement "Attach to 2019 Form 1040, 1040-SR, or 1040-NR" (I have also been unable to find a way for Turbo Tax Business edition to add a Form 8606). Thus, I'm assuming the best way to justify the amount on Line 8 is to include a good - albeit very brief (due to space limitations) - description on the blank line of Line 8.

Highlighted
Level 15

Double-taxed Nondeductible RMDs from Estate IRA

The calculation required is still exactly the same as is done on Form 8606 Part I.  If you want, you can do the same calculation on a blank sheet of paper and include it as an explanation statement and just not call it Form 8606, but I think it's clearer to show it on a Form 8606 and just mark the name and TIN as needed to indicate the purpose.

Highlighted
Level 15

Double-taxed Nondeductible RMDs from Estate IRA

TurboTax regular won't handle an inherited IRA with a basis. You must do it by hand and file on paper.

Not surprising that the Estate program won't either.

Highlighted
Level 2

Double-taxed Nondeductible RMDs from Estate IRA

I guest what I will do is to use 2019 Form 8606 to calculate the taxable amount, and new basis (for eventually filing the 2020 estate return), and enter the calculated taxable amount on Line 8 of Form 1041. Then, use the 3.5-inch long blank dotted-line on Line 8 to enter as much of a tiny explanation as will fit. I won't file the Form 8606 (since that is apparently not permitted with a Form 1041 return), but will simply keep it for reference. This way, the Schedules K-1 will go to the beneficiaries with only taxable amounts included on them, thereby avoiding double-taxation of the nondeductible amounts.

v
Privacy Settings