Distribution from an Inherited IRA in a Trust to a Beneficiary

[trust812]

If there is $100,000 in a Trust checking account and I give one of the Beneficiaries a check for  $50,000 in June 2025 and I take a $50,000 distribution from the Trust Inherited IRA in November 2025 can the K-1 issued to the Beneficiary for Tax Year 2025 show $50,000 as income from the Inherited IRA even though the $50,000 was distributed to the Beneficiary in June before taking the distribution from the IRA in November? I would think the answer is yes and that the sequence of dates doesn’t matter as long as both are done in Tax Year 2025. Thanks!

[M-MTax]

It makes no difference at what time of the year the distributions are made provided they are made during the same tax year (or within 65 days of the close of the tax year if a 663(b) election is made).

[M-MTax]

However, designating one distribution as corpus and the other as income is problematic unless there is specificity in the trust document.

[dmertz]

Distributions from the trust are deemed to come from first from income received during the trust tax year and are Distributable Net Income which reduces the taxable income of the trust and passes the tax liability for that income on to the trust beneficiary.  As previously said, the relative timing of the transactions does not matter as long as both apply to the same taxable year of the trust.

[M-MTax]

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@dmertz wrote:

Distributions from the trust are deemed to come from first from income received during the trust tax year and are Distributable.

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That is the default allocation rule which can be modified by the trust document.

[trust812]

Thanks!

[trust812]

“However, designating one distribution as corpus and the other as income is problematic unless there is specificity in the trust document.”

So let’s say I distributed $150,000… $100,000 was corpus from the sale of a house in the Trust and not taxed because there were no gains. $50,000 is income from the Inherited IRA. Aren’t both permissible? I am not sure what you are saying.

[M-MTax]

Are both distributions permissible? Yes.

Can you make an allocation of corpus and income to different beneficiaries? No, not unless you have express or implied authority to do so as granted by the terms of the trust.

[trust812]

OK, I wasn’t planning on doing different allocations. Thanks! When I make out a check do I need to issue separate checks for corpus and income or specify that in the memo section if one check? If I had to guess it doesn’t matter.  

[M-MTax]

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@trust812 wrote:

If I had to guess it doesn’t matter.  

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You're spot on; it really doesn't matter.