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Level 1
posted Jul 5, 2019 8:41:05 PM

Inherited Distribution used for Disaster Relief

In 2017 we experienced a loss due to a declared disaster. In 2018 my wife inherited a qualified distribution that could not be deferred. Can we claim the inherited distribution as a Qualified Disaster Distribution in order to spread the tax over 3 years?

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2 Replies
Alumni
Jul 5, 2019 10:00:56 PM

Not qualified, because it was Inherited - not an early distribution from your own account. 

Reference: www.irs.gov/retirement-plans/disaster-relief-bill-includes-retirement-plan-distribution-and-loan-options

Level 15
Jul 6, 2019 6:48:56 AM

Yes, a distribution from an inherited qualified retirement account can be reported as a Qualified Disaster Distribution to spread the tax liability over 3 years.  TurboTax will automatically ask if the distribution was a Qualified Disaster Distribution when you enter the code 4 Form 1099-R received by your wife.

 

If the distribution was more than $100,000, be sure to indicate that only part of the distribution was a Qualified Disaster Distribution and limit the amount to the lesser of your disaster-related loss or $100,000 , whichever is less.

 

The assumption here is that your wife was a designated beneficiary of the qualified retirement account.  I'm not sure why this distribution "could not be deferred" unless it was an RMD.  If the beneficiary was a trust or the estate of the decedent, I don't think that this would be a Qualified Disaster Distribution.