1099-R received for Inheritance. Any special treatment?

[lrcook151]

Another question regarding filing a deceased person return. They only have a SSA1099 to file

[DaveF1006]

@lrcook151 If they only have a SSA-1099, there is no need to file a return.

[rjabara]

We received an inheritance in 2021 of what we thought was a Life Insurance Policy, but it appears it was a tax deferred annuity of some type.  We received a 1099-R, with no IRA box checked, with very little contribution and a lot of Tax liability.  My question is a) isn't there any step up for this? and b) if not, is there a way to spread this out over 10 years?  My guess is that this was an annuity that she contributed to at one point and it grew over the years.  Both my Federal and State returns have been dramatically affected.  Anything I can do?

Thank you.

[JillS56]

Unfortunately, it is too late to do anything anything to avoid the tax.   An inherited annuity can be spread over a 5 year period.   Since you already pulled the full amount you cannot spread the withdrawals over 5 years.    You could have also had funds withheld from the withdrawal towards the tax.

[dmertz]

A deferred annuity does not get a step-up in basis.  The taxable portion of the distribution in Income in Respect of a Decedent and is taxable on the recipient's tax return.

If the decedent was subject to federal estate taxes (on Form 706), the beneficiary can claim a deduction for that beneficiary's share of the estate taxes paid up to the amount of the IRD.  Otherwise there is nothing you can do to lower the effect of this taxable income.

[h86those7taxes84ever]

To build on these questions.  Mom passed away in '20.  Left everything in a trust that I share with three brothers under the trusteeship of older brother.  I transferred my portion of  the mutual funds held in the trust in 2022., and liquidated it in 2024  Fidelity 1099R shows me  liable for tax on the full value - but I believe that is incorrect.  Worst case - I believe I should only be liable for tax on the net gain between what I sold it for and what the value was when I transferred my shares from the trust to me (the basis). Is my thinking along the right lines here? 

[Mike9241]

probably. inherited retirement accounts are treated as income in respect of a decedent so if it wasn't a Roth (it has basis) account the tax basis to the trust wass zero and that's the basis the beneficiary gets.