Question about Form 4972, 10-Year Special Averaging For Lump Sum Distribution

[mlpinvestor]

Hi, all.

I was in Turbotax working on a 1099-R for an inherited 401(k), when it brought up a question about using a "Form 4972 (Tax on Lump-Sum Distributions) for a payment received for this same deceased person."  I had never heard of this, so I searched it out and found this: https://fiscalwisdom.com/what-you-need-to-[product key removed]al-10-year-averaging/.  Apparently, it’s possible to take a total distribution from certain "qualifying" retirement accounts and pay the tax as if it were spread out over ten years in the lowest bracket.

What I can’t find out for sure is whether a 401(k) is a "qualified plan" for purposes of this rule.  This would really work to my advantage if it’s allowed.  Turbotax documentation states that the distribution must be from "a qualified pension, profit-sharing or stock bonus plan, but not from an IRA [or] tax-sheltered annuity (section 403(b) plan)."  However, I don’t know if this is an exhaustive and exclusive list, and it’s not clear why a qualified retirement account like a 401(k) should be treated differently from these other exotic things.  Does the IRS consider a 401(k) an "annuity?"

I do appear to meet the other requirements.  Original participant was born before 1936, no rollovers (just transfer of ownership to beneficiaries), full account value withdrawn, etc.

Thanks for any advice.

[BrittanyS]

A 401k is considered a qualified retirement account.  According to the IRS, a 401K is a "A retirement plan that meets the requirements of Internal Revenue Code Section 401(a) is referred to as a "qualified plan." IRC Section 401(a) sets standards for retirement plans"

If you qualify for form 4972, you will have 5 options to choose from.  See the options below provided by TurboTax:

• partial withdrawal as a capital gain and the remainder as ordinary income
• partial withdrawal as a capital gain.  the remainder use the 10-year tax option
• use the 10-year tax option for the entire withdrawal
• roll over the distribution, and report any withdrawals as ordinary income
• report the entire distribution as ordinary income

• 401k plan qualifications
• What is form 4972?