Non-spouse beneficiary of Roth IRA

[joel]

Non-spouse beneficiary inherits a Roth IRA. Are the gains taxable?

[Flyboyjohn]

Not if the account meets the 5 year clock (while death is a triggering event for "qualified distributions" you still have to meet the 5 year holding rule)

[joel]

Does the five year holding rule begin when the deceased first opened the account or when the deceased died?

[masteff]

From Reg 1.408A-6:

"Q-7. Is the 5-taxable-year period described in A-1 of this section redetermined when a Roth IRA owner dies?

A-7. (a) No. The beginning of the 5-taxable-year period described in A-1 of this section is not redetermined when the Roth IRA owner dies. Thus, in determining the 5-taxable-year period, the period the Roth IRA is held in the name of a beneficiary, or in the name of a surviving spouse who treats the decedent's Roth IRA as his or her own, includes the period it was held by the decedent.

(b) The 5-taxable-year period for a Roth IRA held by an individual as a beneficiary of a deceased Roth IRA owner is determined independently of the 5-taxable-year period for the beneficiary's own Roth IRA. However, if a surviving spouse treats the Roth IRA as his or her own, the 5-taxable-year period with respect to any of the surviving spouse's Roth IRAs (including the one that the surviving spouse treats as his or her own) ends at the earlier of the end of either the 5-taxable-year period for the decedent or the 5-taxable-year period applicable to the spouse's own Roth IRAs."