My brother's estate received a deposit from an IRA that my family didn't know existed and plan to place this deposit into the IRA that was setup by our probate lawyer. I received a 1099-R for that deposit with a distribution code of 4G in box 7.
How do I file a 1041 without having to pay taxes on income was supposed to rolled over to that IRA as TurboTax Business doesn't allow me to complete a section that includes a 1099-R?
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This distribution cannot be rolled over to an inherited IRA. A 401(k) is permitted to be rolled over to an inherited IRA only for the benefit of an individual who is a designated beneficiary. An estate is not an individual and therefore cannot be a designated beneficiary. A 401(k) which has no designated beneficiary can only be distributed as income to the estate (code 4 on the Form 1099-R), not rolled over to an inherited IRA for the benefit of the estate (codes 4 and G on the Form 1099-R) or anyone else (although PLRs have allowed a surviving spouse to roll over to their own IRA under certain circumstances). Since the distribution was to the estate of the deceased, you must request that the payer issue a corrected Form 1099-R showing taxable amount in box 2a and showing only code 4 in box 7.
You should contact the probate lawyer and inform him or her of the error in attempting to set up an inherited IRA to receive this distribution.
Once the correct taxable amount shown in box 2a of a code 4 the Form 1099-R, see the following answer by tagteam describing how to report a distribution to the estate as Other Income on Form 1041 and possibly passed through as Distributable Net Income to the estate beneficiaries on Schedules K-1:
This distribution cannot be rolled over to an inherited IRA. A 401(k) is permitted to be rolled over to an inherited IRA only for the benefit of an individual who is a designated beneficiary. An estate is not an individual and therefore cannot be a designated beneficiary. A 401(k) which has no designated beneficiary can only be distributed as income to the estate (code 4 on the Form 1099-R), not rolled over to an inherited IRA for the benefit of the estate (codes 4 and G on the Form 1099-R) or anyone else (although PLRs have allowed a surviving spouse to roll over to their own IRA under certain circumstances). Since the distribution was to the estate of the deceased, you must request that the payer issue a corrected Form 1099-R showing taxable amount in box 2a and showing only code 4 in box 7.
You should contact the probate lawyer and inform him or her of the error in attempting to set up an inherited IRA to receive this distribution.
Once the correct taxable amount shown in box 2a of a code 4 the Form 1099-R, see the following answer by tagteam describing how to report a distribution to the estate as Other Income on Form 1041 and possibly passed through as Distributable Net Income to the estate beneficiaries on Schedules K-1:
Not sure IRS is in agreement with this statement as of 2022.
”An estate is not an individual and therefore cannot be a designated beneficiary. A 401(k) which has no designated beneficiary can only be distributed as income to the estate (code 4 on the Form 1099-R), not rolled over to an inherited IRA for the benefit of the estate”
see IRS:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
and publication of 590-B:
https://www.irs.gov/publications/p590b
don't confuse sponsored 401k plan document rules with IRS regulations
regards
Nothing has changed in regard to this. Code 4G implies a distribution from a qualified retirement plan like a 401(k). A distribution from such a plan is not permitted to be rolled over to an IRA for the benefit of the decedent's estate.
The IRS web page that you referenced is incomplete with regard to this in that it fails to specify that only a designated beneficiary is permitted to do such a rollover and that only an individual can be a designated beneficiary. See 26 U.S. Code § 402(c)(11) which only allows such a rollover "on behalf of an individual who is a designated beneficiary (as defined by section 401(a)(9)(E))." Also see 26 CFR § 1.401(a)(9)-4 Q&A-3 which says "only individuals may be designated beneficiaries for purposes of section 401(a)(9)."
IRS Pub 590-B provides information on distributions from IRAs. A rollover from a 401(k) is not a distribution from an IRA. If the account was instead an IRA, an IRA of a decedent can only be moved to an inherited IRA for the benefit of the decedent's estate by nonreportable trustee-to-trustee transfer, so no Form 1099-R would be generated. Code G can never apply to distributions from a decedent's IRA. (Some banks mistakenly use code G for a trustee-to-trustee transfer of an IRA even though the use of code G for such a transfer has never been correct. They should have been able to figure this out at some point in the over 40 years that trustee-to-trustee transfers of IRAs have been permitted and nonreportable.)
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