BPickerCPA

The answer to KJohnson's question is yes. The year of death MRD is a requirement of the account, not each bene. So if one bene takes enough from his share of the account to satisfy the MRD for the year of death, the IRS will be satisfied. Future year MRD's will be the responsibility of each bene. Barry

Appleby is definitely correct. Post death distributions can NEVER be taxable to the decedent. They are always taxable to the party receiving them, which would be the beneficiary(ies).

I get the impression from your post that between you, your tax advisor and your financial planner, there is a lot of MISinformation about inherited IRAs. I STRONGLY suggest that you do NOTHING right now, until you can have a consultation with a KNOWLEDGEABLE pro who can steer you in the right direction. The wrong move will probably NOT be correctible.

Report the total 1099R amount on line 15a of the form 1040 and put 0 (zero) in line 15b. If questioned by the IRS, show them the statements from the respective brokers.

An in-kind distribution from an IRA, for any reason, is perfectly OK. You cannot do an in-kind CONTRIBUTION (except for a rollover). It scares me to think what else may have been wrong in the seminar.

Bruce, I doubt it. I think the official line will be to use the more conservative method to be safe. On the other hand, if you're willing to fight you can always use the new rules and then try to avoid the 50% if the final regs come out against you. Good luck! Barry

Beginning of 2002 is now a better guess on the finalization of the new regs.

None of this (recalc/non recalc or single/joint) is relevant any more. Everyone uses the Uniform Distribution Table. In truth, the single/joint was not relevant even under the old rules. The IRS position was that if you had a beneficiary, your MINIMUM distribution was computed on the joint life basis. If you wanted to use the single life basis, that just meant you were taking more than the MINIMUM, which is always permitted.

EGTRRA did not change the phaseouts on IRA deductibility.

You have 60 days to return it. Outside of that time limit you're stuck

Shelton, The designated beneficiary, the beneficiary upon whose life expectancy the post-death distributions will be based, is determined as of 12/31 of the year after death. However there is still a beneficiary before that date, and that beneficiary takes the year of death RMD. Be careful, however, that taking the distribution may, according to the IRS, eliminate the possibility of a qualified disclaimer. Barry

Shelton, Thank you for your concern. Neither I nor any family members had any physical involvement. Emotionally is another story. But we will get through this, I guess. Regards, Barry

When you have an IRA and a 403(B), you need to take the MRD from each plan separately. If you have multiple IRAs you can take one MRD to cover all IRAs, the same for multiple 403(B)'s, but you cannot take an MRD from an IRA to cover a 403(B), and vice versa. You can roll the 403(B) into an IRA, but you would have to take the MRD first, then you can roll the balance. If you do this in 2001, then for 2002 you only have to deal with IRAs. You use your age as of your birthday in 2001, so that would translate to your age on 12/31/01. Barry

Roth IRAs do NOT allow tax free withdrawals for education. They allow PENALTY free (10% early withdrawal excise tax) withdrawals. You would still pay income tax on any earnings withdrawn.

John, My guess is that in kind distributions are not used for MRD distributions, at least not with a large degree of accuracy. I would think (and the few cases where I've seen it) is that the participant tells the broker to transfer X shares of ABC stock out of the IRA to the taxable broker account (or possibly send a stock certificate, but I'm sure there's a charge for that). The broker will report the 1099 based upon the value on the date of transfer. The responsibility to meet or exceed the annual MRD is on the participant. As an additional thought, if one did desire to take the MRD in kind, one could ask for a distribution of, say 100 shares of GE, and after the actual transfer value is determined, and it's known that only, for example, 82 shares are need to satisfy the MRD, the other 18 shares could be returned within 60 days. I would also add, from my experience, that very few IRAs in pay status are currently being held at discount/internet brokers. That will probably change as the boomers age. Barry

You can take distributions in kind. It's exactly as you stated - the fair value is taxable, becomes the basis, and the holding period starts on the date of the distribution.

David, I haven't seen anything official on the applicability of the new regs to beneficiaries when the participant died in 2000 or 2001. I don't think anyone else has either. I accept what I personally heard from people in DC, which is that the bene's can use the new rules. The question of a bene naming a bene, is NOT a tax issue. All the IRS has said is that it's permitted, but it's really an issue of local law. The existence or absence of a bene's bene does not in any way affect the minimum distributions. However, I have to comment about pension attorneys who state that it's the province of the participant, not the bene, to name a subsequent bene. If I inherit an IRA, it becomes my asset. The tax law permits me to keep in a tax deferred state, as long as I remove a certain minimum amount each year. But that is my choice to only take the minimum; I can always take more. Once I inherit the account, it's ultimate disposition then is up to me. I can leave any balance in the account to my wife, my children, my alma mater, et al. This is no different than any other asset I own, either because I purchased it, earned it, or inherited it. Unless a trust has specifically been set up to restrict my ownership rights, no one can tell me (other than spousal rights) who I can or can't leave my assets to. The right of a beneficiary to name a beneficiary is merely a probate avoidance mechanism, so that the inherited IRA is not part of my PROBATE estate. It most definitely is part of my TAXABLE estate. I would be hesitant to put too much faith in any attorney who does have a grasp of basic property rights. My 2 cents. Barry

As long at the trust qualifies, post death distributions are based upon the life expectancy of the oldest trust beneficiary.

There is no reason to know the date of birth of a non-spouse beneficiary until the account holder dies.

No need to.

Actually, the contribution is allowed regardless of the income. The only limiting factor is that the spouse cannot be 70½ or older in the year of the contribution. The contribution for the spouse is fully DEDUCTIBLE if income is under $150K. Barry

But the distribution of any applicable income IS subject to both income tax and the early withdrawal penalty. Barry

The rule is set out by Congress, not the IRS. Whether there is a rationale for it is not relevant, that's the rule. The penalty is 6% of the amount not timely withdrawn. The 10% penalty is on the earnings, not the amount put it.

I have been told informally by the IRS that the new regs do not change the IRS' position on these types of rollovers.

1. The question of splitting of the trusts would theoretically be applicable under both old and new regs, but under the old regs it would only be applicable if death was before the RBD. Under the new regs, it would also be applicable if death was after the RBD. 2. Technically, it's not the eldest bene's LE, it's the bene with the shortest LE. That's why if the trust could benefit the estate (pay estate taxes or expenses or administration costs), the trust fails. 3. I've never seen a situation where the trustee had discretion. I think it would have to be mandated in the trust document. The rule is clearly that you use the bene with the shortest LE when you have multiple bene's of a trust. The only way the split works is if you can show that it's multiple trusts, not multiple bene's of one trust. 4. There are enough PLRs to lead to the understanding that if it's one trust with multiple bene's, you use the bene with the shortest LE. I have to admit that I don't recall where my understanding came from. I don't recall a PLR, so it could be from discussions with the IRS, or discussions with other IRA pros. Sorry. Good luck with your PLR.