Direct transfer death distribution tax reporting
IRA assets are directly transferred from deceased IRA owner (Age 67) to IRA owner’s daughter (Age 38) maintained in the same custodian. Should she receive form 1099-R in her name as death distribution (though no money is received) and 5498 as rollover contribution? Transfer of assets to spouse is not a taxable event, probably no 1099-R or even 5498 is expected.
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-28 13:24
There should be no 1099R issued, as there was no distribution, just a transfer. However, a 5498 for the beneficiary must be issued showing the FMV at the end of the year of death, and the new inherited IRA title. No RMD info is required for the beneficiary, and in most cases the 10 year rule will apply with no annual RMDs.
Permalink Submitted by Adman Gilly on Wed, 2021-07-28 13:41
That helped! If assets are moved to daughter’s Inherited/Beneficiary IRA with FBO Title shoun’t 5498 show Rollover contrbution? Suppose death distribution was paid to the benefiary and new Inherited IRA was opened with another custodian, would situation change?
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-28 14:34
No, it is a direct transfer, not a rollover. A non spouse beneficiary cannot even do a rollover of a distribution, therefore beneficiary should be careful not to request an actual distribution, since it would be taxable with no chance of a rollover. However, if a full distribution to the beneficiary is made in the year of death, no year end 5498 need be issued as the balance will be 0. There is also a decedent’s 5498 issued showing the value at the DOD OR at year end of death year.
Permalink Submitted by Adman Gilly on Thu, 2021-07-29 02:41
If death distribution is received, are you saying the same cannot in reinvested into Inherited IRA account? and defer taxes for 10 years? But spouse can receive the death distribution and roll it over in 60 days?
Permalink Submitted by Alan - IRA critic on Thu, 2021-07-29 04:26
Yes, a surviving spouse can roll over a distribution to her own IRA, but a non spouse beneficiary cannot do any rollover. A distribution to a non spouse beneficiary is irrevocably taxable.