Inherited IRA

[RPMBoss888]

I inherited 1/3 of an IRA from a relative who was 80 years old when she passed away.  The total of the portion I received was a little under $20,000.  I took the cash out option in 2023.  In doing my taxes, do I select "Not eligible for exclusion for those over 59 1/2" in regards to the question, "Where is your distribution from?" In my case, it is either this or "None of the above."

[Mike9241]

is the code in box 7 "4-death"

then Turbotax should be asking questions about inherited IRA

such as your relationship to the deceased and other questions

[RPMBoss888]

Yes, the code is "4." I answered the questions you are referring to, but the "59 1/2 exclusion" question is also coming up.

[dmertz]

When entering a code-4 Form 1099-R, make sure to answer Yes when presented with the poorly worded question asking if you inherited the IRA from [financial institution].  (The question is really asking if you inherited the IRA held by [financial institution].)

[RPMBoss888]

Any responses that might target my specific question would be appreciated.  Thank you.

[dmertz]

Since the question doesn't seem to make sense with regard to your federal tax return, perhaps the question is related to your state tax return.  What state?

[RPMBoss888]

New York State

[dmertz]

Because your share is 1/3 as beneficiary, only 1/3 of the distribution is eligible for exclusion.  See If you receive pension and annuity income of a deceased individual on page 14 of NY Pub 36:

https://www.tax.ny.gov/pdf/publications/income/pub36.pdf

I don't have TurboTax's NY state software, so I don't know how this is accomplished in TurboTax, but I certainly would not select "Not eligible for exclusion for those over 59 1/2" because a portion of the distribution is excludible from NY state income based on the information in NY Pub 36.

Also see the details on page 13 of Pub 36 regarding distributions from IRAs.

[LenaH · Accepted solution]

To calculate the correct amount of excludable distribution on your NYS return, please follow the steps and screenshots below. 

First, enter None of the above on the screen, Where is your distribution from?

Then, please follow the instructions below to indicate that you were a beneficiary on the state return:

1. Open your state return.
2. On the page Changes to Federal Income, click on Start next to Received Retirement Income.
3. Click Edit next to the IRA.
4. Answer yes to the question, Were you a beneficiary?
5. Enter the decedent information on the next page and continue through the return.

@RPMBoss888