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Author: BubblesUp One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: IRA Burden Date: 12/29/2000 2:21 PM
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>>My father died in 1992 and my mother inherited his IRA.
Ok. I assume by this you mean she rolled it over into her own IRA and named you & sis as beneficiaies at that time, then made the SL/R election when she turned 70.5. The general rule in your situation is that the beneficiaries must withdraw the funds by the end of the year after your mother passes away (resulting in ordinary income to you & sis at that time). It would have been better to have done things differently prior to your mom's turning 70.5 (you are locked into the setup that was in effect at that time).

There is one possible alternative to lessen the burden. Over the last 18 months there have been several Private Letter Rulings by the IRS that allowed the children/beneficiaries, after the IRA owners death, to withdraw the IRA over the "remaining term-certain" of the oldest of the children (the remaining term-certain is calculated by looking at the beneficiary's life expectancy when mom turned 70.5, then subtracting 1 for each year that mom lived past that year). Specific PLR's were 1999-15063, 1999-51053, and 2000-18057. One caveat - in all 3 the beneficiaries were so named at the time the IRA owner turned 70.5. To my knowledge there have been no favorable rulings if no bennys were named when the owner turned 70.5. Note also that PLR's are only binding for the taxpayer who requests it and CANNOT be relied upon by others. You'd have to request a ruling for your particular situation.

Of course, if the funds in the IRA aren't substantial it may not be worth the hassle. Also if they & mom's income are minimal, you could figure out how much extra to withdraw per year & remain in either no tax or lowest tax bracket.
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