Treating Inherited Spousal Traditional IRA as Your Own

[Wedding5500]

Hello,

My 91-year-old Dad passed in 7/2024 and had not taken his RMD for 2024.

His IRA account was closed and via a Custodian to Custodian transfer, the funds were moved to a credit union where my Mom (87 years old at the time) opened a new Traditional IRA CD in her own name.

We then took my Dad’s final RMD for 2024.

My Mom’s Traditional IRA CD that she’d had for many years matured at another bank in 2024 and we had it moved via Custodian to Custodian to the credit union where we had put my Dad’s IRA  I had my Mom take an RMD from “her” IRA and the one she got from my Dad.  The credit union sent a 2025 1099-R showing the combined RMD amount taken from “her” IRA and the one she got from my Dad.  The Box 7 code is “7.”

My question is - on TT for the credit union 1099-R where it says, “Do any of these situations apply to you?”, do I check the box that says, “I inherited this IRA?”  Or because the IRA was opened in my Mom’s name in 2024, the 1099-R is under only her name, and Box 7 uses Code 7, is this IRA fully considered HERS, and I just check the box that says none of this applies to her?

Thank you so much for any help someone can provide me.

[dmertz · Accepted solution]

"The credit union sent a 2025 1099-R showing the combined RMD amount taken from “her” IRA and the one she got from my Dad.  The Box 7 code is “7.”"

This implies that there is only one IRA, which is fine.  The amount that she was required to take was the sum of her 2025 RMD and the portion of your father's 2024 RMD that your father had not satisfied before death.  The completion of your father's 2024 RMD is not treated as being late because if a decedent's RMD is completed by a beneficiary by the end of the year following the year of death, it qualifies for an automatic waiver of the excess-accumulation penalty.

"do I check the box that says, “I inherited this IRA?”  Or because the IRA was opened in my Mom’s name in 2024, the 1099-R is under only her name, and Box 7 uses Code 7, is this IRA fully considered HERS, and I just check the box that says none of this applies to her?"

The latter.  The IRA is her own IRA, no longer treated as an inherited IRA.

[Wedding5500]

Hi @dmertz,

You are the one who assisted me with TY 2024 when I was preparing my parents tax return after his passing.  I couldn’t have done it w/out you.

My Dad passed in July of 2024 and in October of 2024, I had my Mom take my Dad’s final RMD, which he had not taken prior to his passing.  I had her use his age/denominator.  My Mom shouldn’t have taken anything in 2025 for my Dad, correct?  I thought we satisfied the IRS’ requirement by taking his final RMD in the year of his passing.  So in 2025, I had my Mom only take out HER RMD’s, using her age/denominator.  Was this wrong?

This year, that TT radial button asking if it was an inherited IRA threw me off because technically she *did* inherit it.   Thank you for letting me know the IRA is now treated as her own, so I will NOT check the inherited button  and I won’t have this issue next year.

I don’t know why the credit union only gives her one 1099-R.  The statement does show only one main account number, and the two separate IRA CD’s have their own “sub-number” and IRA CD maturation dates.  I won’t worry about it because the sum of the 1099-R is equal to the RMD necessary from both IRA’s.

I am now concerned about your statement that my Mom should have taken an RMD in 2025 for the IRA she inherited, even though I thought we satisfied that requirement in 2024 by using my Dad’s age/denominator.  Please let me know.

Thank you so much!

[dmertz · Accepted solution]

"My Mom shouldn’t have taken anything in 2025 for my Dad, correct?"

Correct.  In 2025 there was no longer an inherited IRA that would be subject to beneficiary RMDs.  Even if the transfer to the IRA in your mother's name did not take place until 2025, she would still be treated as owner for all of 2025.

The fact that only one Form 1099-R was issued showing the combined amount of the RMDs suggests that they are treating it as one IRA account containing two CDs.

"that TT radial button asking if it was an inherited IRA threw me off because technically she *did* inherit it. "

Yeah, that confuses everyone who encounters this situation.  TurboTax really shouldn't be asking this question at all for distributions from traditional IRAs and should just go by the code in box 7 (code 4 indicating a distribution to a beneficiary of an inherited IRA, code 1, 2 or 7 indicating a distribution from an owned IRA).

"I am now concerned about your statement that my Mom should have taken an RMD in 2025 for the IRA she inherited,"

By that I meant the account (or least the CD) that is now hers and no longer your father's.  You said that two RMDs were taken in 2025, so I assume that that was one for each of the CDs, which is all that was necessary.  Based on what you have said, your father's last RMD was completed in 2024.

[Wedding5500]

@dmertz, I cannot thank you enough for all of your thorough answers and explanations so that I can understand what you’re saying, what I’m trying to accomplish, and that I am able to do it correctly.

“Yeah, that confuses everyone who encounters this situation.  TurboTax really shouldn't be asking this question at all for distributions from traditional IRAs and should just go by the code in box 7 (code 4 indicating a distribution to a beneficiary of an inherited IRA, code 1, 2 or 7 indicating a distribution from an owned IRA).”

I agree - TT really needs to either word it differently, or like you said, go by the code in Box 7.

“By that I meant the account (or least the CD) that is now hers and no longer your father's.  You said that two RMDs were taken in 2025, so I assume that that was one for each of the CDs, which is all that was necessary.  Based on what you have said, your father's last RMD was completed in 2024.”

Yes, in 2025 I had her take one RMD from the IRA she’s had for many years, and one RMD from the IRA she got from my Dad, that is now hers.  Thank you, I’m relieved to know that taking his RMD in 2024 satisfied the requirement for his “final” RMD.  Thank you for the clarification, it is much, and truly, appreciated.

Thank you!