RMD in year of death- From Ron Merolli

[Guest Paul Vickers]

Joe dies in 2001. He became 70 1/2 in 2001 but hadn't taken his RMD yet. Does the RMD for 2001 go as a taxable item on his final 2001 tax return?

[Belgarath]

Interesting question. I can't cite anything specific in the code, but I don't see how this would have to be included, as by definition the required beginning date is April 1 of the following year (2002). I think there will be no income taxation to anyone until payments are made to the beneficiary under the normal RMD rules. Is the beneficiary the spouse? If so, the spouse is allowed to roll over the entire amount, so how could there be taxable income to be reported?

[Mary Kay Foss]

The death of the participant (Joe in your example) does not put him on an accrual basis. Therefore Joe's 2001 RMD is not taxable on his final tax return.

The RMD for the year of death is the amount Joe would have received if living and it is paid to the plan beneficiary. If the spouse is the beneficiary, the proposed regs indicate that the amount Mrs. Joe could treat as her own or roll over is the amount in excess of the RMD. With a spouse beneficary filing a joint return with Joe, it could be on the final return but as Mrs. Joe's income.