Form 1099-R Tax Reporting of Death Distributions from an IRA to a Qualified Trust

A Qualified Trust(meeting all four IRS requirements )is the IRA beneficiary of a deceased owner. The oldest beneficiary of the trust wishes to be treated as the beneficiary of the IRA for calculating life expectancy RMD’s(the “Pass-Through” provision). Are such death distributions to be tax reported on IRS Form 1099-R to the trust as the IRA beneficiary or to the beneficiary(ies)of the trust receiving these payments as if the trust no longer exists?

I believe the Trust is still the beneficiary of the IRA, payments will be made to the trust for beneficiary distribution and that the “Pass-Through” provision exists only to modify the post-death RMD calculations and not to whom the payment is paid or to be tax reported. Other colleagues strongly disagree. Help?



The trust remains the beneficiary unless the trustee has assigned the IRA to a trust beneficiary. Therefore, the 1099R will be issued to the trust EIN. The trust provisions determine if the distribution will be accumulated in the trust and taxed to the trust on Form 1041 or passed through to the trust beneficiary on a K 1. If the trust beneficiary receives a K 1 the distribution will be reported on the beneficiary return and taxed at the beneficiary’s ordinary income tax rate. If and when the inherited IRA is assigned to the trust beneficiary a 1099R would be issued directly to the beneficiary under the beneficiary SSN. Assignment of the IRA out of the trust will not change subsequent RMD divisors from what they would have been.



That’s the clearest exlanation yet of IRA distribution to a trust.  Looking further, if the decedent’s IRA contained basis, how would this be distributed?  Would the trustee show a basis percentage or nontaxable amount on the forms K-1 to the beneficiaries?  Or, if the distribution is accumulated in the trust, how would the basis be reported on the 1041 for the trust?  Would the trust file a form 8606?



Benn, the 1041 should include an 8606 to reduce the 1099R amount to a taxable amount, and only the taxable amount would go in Box 5 of the K 1 if the distribution is passed through to the trust beneficiary. An 8606 would be needed either way to document that the IRA distribution to the trust was partly basis.



Thanks for the help here!  IRS instructions are amazingly unhelpful for IRA distributions to trusts.  If a taxable IRA distribution to a trust passes through to the trust’s beneficiaries and is reported on K-1 box 5, how should it avoid being subject to the NIIT?  For example, should K-1 box 14 include a code H entry with a negative amount to deduct the trust beneficiary’s passed-through share of the IRA distribution from his/her NII?



Something similar happened to me. I recieved an IRA distribution from an estate and got a K-1form with the amount in box 5 and reported it that way. Now the IRS thinks I owe the Net Investment Income Tax (NIIT) on it.  How should I have reported this qualified plan distribution from the estate without a 1099R? Please let me know? 



I received a taxable IRA distribution from my brother’s estate that was reported on K-1 box 5.How can I report that to the IRS so it is not subject to the NIIT? Thanks,



IRA income is not reported on Form 8960 because it is not subject to the NIIT.



I agree. But if I report what I got from the estate for this inherited qualified plan (IRA/401K) on the K-1 form line 5 in my Schedule 1 (line 5) it ends up on the 8960 form on line 4a. Are you supposed to subtract this on Line 7 of the 8960. I guess I need a taxt expert.Thanks, Allan



I agree with what was mentioned above, that the amount in box 5 of the Schedule K-1 (Form 1041) that is attributable to distributions from qualified retirement accounts should also have been reported as a negative amount with code H in box 14 of the Schedule K-1 to indicate that that portion of the beneficiary’s share of income is not subject to NIIT.  The negative code-H amount would then go on Form 8960 line 7 as an adjustment to investment income.



Thanks very much. That’s what I will do. Allan



Note that while the IRA distribution is not subject to the NIIT itself, the IRA income could increase MAGI for NIIT purposes over the NIIT threshold which would expose other NIIT subject income to the tax.



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