My brother & I inherited my mother's IRA in 2017. Her date of death was 11/15/17. I noticed that she did not take her RMD in 2017. What should we do?

[vikingsfan6281]

Once again I can not thank you enough for your insightful information.  Another question then, how will the 3 siblings report withdraws from the inherited IRA on their 2019 tax return if they are not taking 3 equal withdraws to satisfy the year of death RMD?  Will it matter as long as the total withdraws equal the year of death RMD?  In my example, one sibling will end up taking less withdraw from the inherited IRA than the other two siblings, but the total taken will be the year of death total.  Also, I assume it does not matter but the IRS agent got me a little worried that it mattered what type of investment you put the inherited IRA in.  I told her that it was in an inherited IRA and not an IRA named in the beneficiary's name and she said it did not matter.  She then went on a 10 min rant that got me both annoyed and a little worried.  I thought and still do (though maybe I am wrong) that as long as the type of account was an inherited IRA, it could be invested in anything that the client wanted.  Thanks.

Bill

[dmertz]

Whatever distribution is paid to a particular beneficiary in 2019 is simply reported on that beneficiary's tax return.  There are no special reporting requirements.  A Form 1099-R reporting a distribution made to a beneficiary will have code 4 in box 7 to indicate that it was paid to a beneficiary.  It would be a good idea for each beneficiary to keep personal notes indicating the amount each beneficiary takes in 2019 to be able to provide to the IRS in the unlikely event that the IRS ever questions whether or not the decedent's year-of-death RMD was completed.

Except for investments that are not permitted in any IRA under any circumstances (life insurance or collectibles, for example), the type of investment held in an inherited IRA (or any IRA for that matter) is irrelevant as long as the Fair Market Value of the investment can be determined and it (or proceeds from the sale of the investment within the IRA) is able to be distributed to satisfy RMDs from the IRA.  In the case where the beneficiary of the IRA is the decedent's estate (apparently not the case here), it might be prudent for the executor of the estate in their fiduciary duty to shift the investments to conservative investments to avoid a loss in value prior to transferring to inherited IRAs for the benefit of estate beneficiaries, but there is no statutory requirement to do so.