A beneficiary may be able to claim a deduction for estate tax resulting from certain distributions from a traditional IRA. The beneficiary can deduct the estate tax paid on any part of a distribution that is Income in Respect of a Decadent (IRD). He or she can take the deduction for the tax year the income is reported. The deduction is taken by the beneficiary receiving the IRD, not the beneficiary who pays the estate tax.
The deduction is taken only if you itemize deductions and is on Schedule A.Basically,
you get an income-tax deduction for the amount of estate tax paid on
the IRA balance. Let's say you inherited a $100,000 IRA, and the fact
that the $100,000 was included in your benefactor's estate added additional estate taxes of$25,000
to the estate tax bill. As you withdraw the money from the IRA and pay
tax on it, you also get to deduct a proportional amount of the estate
tax paid. If you withdraw $50,000 in one year, for example, you get to
claim a $12,500 itemized deduction on Schedule A.
In TT under deductions and credits, close to the bottom choose Other Deductible Expenses, answer no to generation skipping, then ignore the boxes, and say yes to any other deductions, the 3rd box down says Estate Tax Deduction (not reported on k-1), choose the correct allocation amount based on the impact of the estate taxes, you can continue to take this deduction until the amount is used up....
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