I Inherited a IRA annuity

[XAM330]

I inherited a annuity this year from someone who died in April, the 1099-R has the tax I paid when I took the whole amount out. It also has the Box 7 IRA/s e p/simple box checked and code is 4 with box 2 b checked as taxable amount not determined. I know that it was created with an IRA rollover and that they were getting distributions yearly. I am wondering how much of it is taxable since I do not know if the original IRA was pretax or post tax or if it matters?. I do know the initial amount of the rollover to open this annuity.

Also T T is asking me How much of this distribution applied to your Dec 31 2025 Distribution? listing 3 options

1 the entire distribution, 2 some of the Distribution and 3 None. Since I closed it out I was thinking #1.

Prior to this T T asked for the amount of the R M D for Dec 2025. I had to put something so just put the same as 2024 Distribution to continue. Does it matter if the original IRA that was rolled over was pretax or not? T T did not ask me about it at all. I thought it was all taxable until I seen the 2 b box as taxable not determined.

[dmertz]

Unless you have information from the last Form 8606 that the decedent filed, if any, showing basis in nondeductible traditional IRA contributions, the entire amount is taxable.  If you do have such information along with information amount any other traditional IRAs that the decedent had, you must calculate the taxable amount outside of TurboTax using the method on Form 8606 and enter the resulting taxable amount .  TurboTax will place this amount in box 2a of TurboTax's 1099-R form.

As for TurboTax's RMD questions, because the distribution to you was not eligible for rollover, you can indicate that the required amount was the amount distributed (or any lesser amount) and that it was all RMD.  This will avoid TurboTax preparing Form 5329 Part IX.

[CesarJ]

Because this was an inherited IRA annuity and the 1099 R shows Code 4 for the death with the IRA/SEP/SIMPLE box checked, the distribution is taxable unless there is after-tax (basis) in the original IRA.

Box 2b is common for inherited IRAs and simply means the custodian does not know the taxable portion. If the original IRA was a pre-tax Traditional IRA (most are), then the entire amount is taxable. If there were any nondeductible (after-tax) contributions, only that portion will be tax free, but that will require records (Form 8606) from the original owner.

Since you do not have evidence of after-tax contributions, TurboTax treats the full amount as taxable. 

For the question asking how much applies to your December 3, 2025 distribution, if you fully closed the inherited IRA in 2025, select "Entire distribution.”

The RMD amount you entered earlier does not change the taxable amount. It’s only used to verify the RMD was satisfied. 

@XAM330 

[XAM330]

Thanks for the help Cesar J and dmertz.

As for the page, " Lets get more information about your required minimum distribution". There is only a box to input a $ amount and says, "Enter a minimum distribution amount. Enter 0 if this account had no required distribution". There is nothing to select for Entire Distribution. I know she was getting a yearly distribution though. Maybe it is referring to me though?

It will not allow you to proceed until an amount or 0 is input.

The 1099-R does not have box 2b checked for Total Distribution even though all funds were paid after fed and state taxes. I did receive a 1099-INT for some interest from this annuity. It was all paid with 1 check and the details listed showed the amounts and taxes with the AJ line blank. I called them about the discrepancy and was told it was interest and that they would be sending a 1099-INT.

I just tried it with the box 2 b total distribution checked and it still asks for the minimum R M D. ? Don’t know why that box is not checked since it was the total distribution?

If I put an amount greater than 0 in the minimum distribution box it will then show the page with "ENTIRE DISTRIBUTION applied to the R M D". Otherwise with 0 it just returns to the 1099-R list.

Also on the situations page I am not sure if it is a Sep or Sep simple? How would I find out?

So it seems that I need to call them to find out what that amount would have been and then select the ENTIRE DISTRIBUTION on the page. I will try it tomorrow.

Note: I did find out it was a Qualified annuity. So it must be from pretax money from what I understand.

Thanks for the help and some learning experience for me.

[dmertz]

It was a qualified annuity because it was an IRA annuity.  However, that tells you nothing about whether the decedent had basis in nondeductible traditional IRA contributions.  That information would have to come from the decedent's last-filed Form 8606, if any.