IRD Calculation

[user17702236067]

How do I calculate IRD when the value of the IRA on date of death was greater than the value of the IRA transferred to the estate? Do I still use the full value of the IRA as of date of death? Or do I use the difference between the value at date of death and the value at time of distribution to the Estate? (Decedent was age 50 and died on 12/25/2024. IRA was valued approx. $32,000 more on date of death than the amount it was valued in 2025 at time of distribution to the Estate.) My concern is that when I use the full value of the IRA as of date of death, all taxes paid by the Estate are refunded. I do not want the "beneficiaries" to be responsible for the payment of the taxes. (She was not married, had no children, did not have a will and there were no beneficiaries named for the IRA. Based on a prior question/answer about beneficiaries, I have named 3 individuals as "beneficiaries" because they received some of the monies from the Estate after all taxes and debts were paid first)

[DavidD66]

Can you clarify your question.  Are you trying to determine the amount of Income in Respect of Decedent (IRD) to include in the assets of a taxable estate?  If not, what are you trying to determine?  

[dmertz]

Did the estate pay estate tax with Form 706 and you are trying to figure the amount of estate tax deduction to report on Form 1041 line 19?  If so, the estate tax deduction would be the amount of estate tax attributable to the total date-of-death IRD of the estate times the amount of taxable income distributed to the estate from the IRA divided by the total date-of-death IRD of the estate.  You can't use the date-of-death value of the IRA in the numerator of this calculation.

If you are trying to determine the amount of taxable income to include in on Form 1041, it's simply the amount distributed to the estate.  If this income was (or will be) distributed to beneficiaries rather than being retained in the estate, there would then be a deduction for Distributable Net Income and the income would be passed through to beneficiaries on Schedules K-1 for taxation on the beneficiaries' individual tax returns at their individual income tax rates which are almost certainly going to be lower than the estate's income tax rate.  You can't have the income be taxable to the estate without retaining it in the estate and then paying it out to beneficiaries in a later tax year of the estate.  Given that the value of the IRA changed by $32,000 between 2024 and 2025, I'm guessing that the amount distributed to the estate was substantial and that most of it would be taxed at 37% if retained in the estate.