beneficary IRA need clarification for 1099-R

[Guest JulieT]

Dad (84 years old) died May 2001 before taking his required minimum distribution for tax year 2001 RMD was taken in Dec. 2001 and distributed to the beneficiarys...... I am the executor and one of 2 beneficiaries of the IRA

Just got off the phone with Fidelity. They reported my dad's MRD under his SS number even though the MRD was taken out after he died and the distribution was given to the beneficiaries. I have attempted to get Fidelity to issue a corrected 1099-R for them to report the distribution to myself and my brother--the beneficiaries!!! Fidelity has stated that the distribution (of 20,000.00=MRD) SHOULD go to my father and be reported as income to him!!! Is this correct??!!!Dad had thousands over 35000.00 in medical expenses that can easily be deductible! I cannot claim him as a dependent so therefore eating alot of medical deductions since his only income for 2001 was 6000.00. (This really works in my favor--not to have to report this income as my own but feel that this is wrong advice.)IS IT? After the conversation with Fidelity... I do not think I will be getting a corrected 1099-R and they have me believing that his MRD can be reported as income on HIS tax return. Can I legally report his RMD as his income even though it was recieved after death?

Julie

:confused:

[BPickerCPA]

Fidelity is wrong, but this is not a revelation. You have a better chance of getting pigs to fly than getting one of these custodians to (a) admit a mistake, and (B) issue a new 1099R.

Report it the proper way, which is to have the beneficiaries report it. On his personal return, attach a statement showing the income, and a subtraction explaining that the income was reported by the beneficiaries.

If you personally paid his medical expenses, you may be entitled to the medical deduction. Speak to a competent pro.

[mbozek]

Julie - post mortem IRA distributions are a disaster because no one focuses on the distribution issues until it is too late. A lot vendors report post death payments under the decesed's ss # because there is no data field for another person's ss #. But u need to answer some questons: Who received the payments from the IRA? Was it paid to estate and then to the beneficaries? Was the value of the estate over $675,000 and therefore subject to estate tax? I believe the estate could deduct the medical expenses from the gross estate. If the payments were made to the beneficaries then they have received IRD but u can deduct a prorata amount of the estate taxes attributable to the IRA from the distributions.

There are ways in which the payment can be reversed under the claim of right doctrine but it would require proof that the beneficaries were not legally entitled to receive the payment. You should retain a CPA or tax preparer to advise u on the options before 4/15. Don't rely on information provided on the web.

[Guest Shelton]

Julie,

I have had several similar situations with Pershing (DLJSC). The problem generally is, the beneficiary filled out the paperwork for the deceased account before notifying them of the death. Pershing has never refused to make this correction, as a matter of fact, it was Pershing who upon later receiving notification of the date of death told me that it had to be corrected the firs time it occurred.

I have also had several fights with attorneys who challenge the view that the RMD for the deceased must be reported in the tax ID number of the deceased. They usually come around after talking to Pershing.

You must insist that the custodian make this correction- less likelihood of a red flag with the IRS. Ask to speak with a manager and be very firm.

As far as taking advice from Barry Picker- note that he is a CPA, a very good one at that. He has written a book on the subject, which was reviewed by attorneys who are expert on the subject. He has never steered me wrong.

[Guest mpedroza]

Just curious what IRS distribution code was used on the 1099R...code 4 or code 7? When you go back to Fidelity have them look at the IRS Instructions for Forms 1099-R (you can even order a copy off the internet) and read page R-5 under "BENEFICIARIES". If they still have a problem providing you with a corrected 1099R with IRS code 4 under each benes SS#...they've got bigger problems.

[Guest JulieT]

Miracles of all miracles....

Yesterday, Fidelity sent me a corrected 1099R in the name of the beneficiaries!!! As the MRD was distributed to the benes. after death. can't beleive they got it right! I no longer have to seek professional help to file a 1041. Yes they coded 4 for death.

Julie:D