Question, I have a client that is being informed that they might be able to make a SEP IRA contribution post death. The Decedent can make a contribution of about $50,000 for both 2018 and 2019 (decedent can maximize contribution $55K and $56K). The Decedent died in 2019. If the contribution was made, then there would be about a 50,000 tax savings and those SEP IRA contributions would transfer immediately to the designated beneficiary.
I see on this site the following:
4. CAN AN IRA OR ROTH IRA CONTRIBUTION BE MADE FOR A DECEASED PERSON IN THE YEAR OF DEATH (EMPHASIS ADDED)?
IRS says no because a dead person has no need to fund a retirement plan. Who can argue with that logic?
I found a PLR 8439066 (1984) that also says no. THe PLR says the following:
"Since A is deceased, the contribution made by Estate X would not be a contribution for retirement purposes. Since A had not
made a contribution to B's spousal IRA before her death, Estate X cannot, subsequent to A's death, make a contribution to B's
spousal IRA based upon the compensation A received during taxable year [the year of A's death].
Based on the foregoing, we conclude that Estate X cannot make tax-deductible contributions to an IRA on behalf of A, nor can
Estate X make tax-deductible contributions to B's spousal IRA for taxable year [the year of A's death]."
A CPA is saying that you might be able to make a SEP IRA contribution. Is that correct?
Let's assume that you cannot make a SEP IRA contribution, the 6% excise tax would be imposed, correct? Would that 6% excise tax be in addition to the income tax on the SEP IRA contribution, or separate. If it is not in addition to the normal tax, then aying a $6,000 is better than paying $50,000. Would that excise tax carry over to the beneficary?
(1) Can the decedent's estate make a SEP IRA contribution post death for the year prior to the Decedent's death?
(2) Can the decedent's estate make a SEP IRA contribution post death for the year of the Decedent's death?
(3) Would the 6% excise tax carry over to the beneficiary as an excess contribution?
Thanks for the help.