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lchonko
New Member

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

 
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LeeM
New Member

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

If you inherited the IRA form a non-spouse, you cannot treat it as your own. So, you would be taxed on that distribution with that exception of any non-deductible contributions made to that plan.

It means you cannot make any contribution, you cannot rollover any amounts into or out of the IRA, other than trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.  You also must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

If you received a distribution from an inherited IRA, it is added to your income and taxed accordingly. You will be receiving a Form 1099-R indicating your distribution as a “death distribution” – code 4 in box 7 will be applied.

Please enter this form in the Wages and Income section, as you will be asked additional questions about the decedent. For example, if the decedent made any nondeductible contributions. 

Any nondeductible contributions are treated as return of investment and are not taxable.

{Edited 2-12}

View solution in original post

4 Replies
LeeM
New Member

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

If you inherited the IRA form a non-spouse, you cannot treat it as your own. So, you would be taxed on that distribution with that exception of any non-deductible contributions made to that plan.

It means you cannot make any contribution, you cannot rollover any amounts into or out of the IRA, other than trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.  You also must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

If you received a distribution from an inherited IRA, it is added to your income and taxed accordingly. You will be receiving a Form 1099-R indicating your distribution as a “death distribution” – code 4 in box 7 will be applied.

Please enter this form in the Wages and Income section, as you will be asked additional questions about the decedent. For example, if the decedent made any nondeductible contributions. 

Any nondeductible contributions are treated as return of investment and are not taxable.

{Edited 2-12}

lchonko
New Member

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

I am not asked that question since it is an inherited IRA
LeeM
New Member

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

I edited the answer to apply to your inherited IRA, assuming it is from a non-spouse.

My 1099-R reports my entire gross distribution as a taxable amount even though I rolled it into another inherited IRA account. The box 7 distribution code is 4. What now?

An inherited IRA with a code 4 can only be rolled into another IRA if inherited by the spouse of the deceased.

Inherited IRA's by a non-spouse can have the IRA trustee do a trustee-to-trustee transfer into a beneficiary account that must remain in the name of the deceased with you named as beneficiary.

TurboTax will ask if the IRA was inherited by the spouse.   Then asks if the spouse put the money into his/her own IRA.  That will make the distribution a rollover on the 1040 line 4a and nothing on 4b.
     
An inherited IRA from a non-spouse is not eligible for rollover.

Anything you put into a retirement account by a non-spouse would be a new contribution to that account subject to the normal contribution limits or it would be an excess contribution.


**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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