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Author: shaggydown Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121177  
Subject: Tax issues re: inherited Ira Date: 4/9/2010 9:33 AM
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I recently inherited a Ira from my deceased parent. I have successfully transferred and titled the account into my trading acct. This account is tax deferred, and I will have to take withdrawls starting 2011, based on life expectency, etc. Since transferred I've sold out of mutual funds and have purchased in and out of stocks. Are there any tax reporting implications that I'll have due to moving out of mutuals?
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110026 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 10:03 AM
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I recently inherited a Ira from my deceased parent. I have successfully transferred and titled the account into my trading acct. This account is tax deferred, and I will have to take withdrawls starting 2011, based on life expectency, etc. Since transferred I've sold out of mutual funds and have purchased in and out of stocks. Are there any tax reporting implications that I'll have due to moving out of mutuals?

No implications at all. What happens inside this IRA is treated the same as what happens inside any IRA.

Ira

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110028 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 11:29 AM
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shaggydown: "I recently inherited a Ira from my deceased parent. I have successfully transferred and titled the account into my trading acct. This account is tax deferred, and I will have to take withdrawls starting 2011, based on life expectency, etc. Since transferred I've sold out of mutual funds and have purchased in and out of stocks. Are there any tax reporting implications that I'll have due to moving out of mutuals?"

My condolences on your loss.


irasmilo: "No implications at all. What happens inside this IRA is treated the same as what happens inside any IRA."

I do not necessarily disagree, but I would like to question more about
"titled the account into my trading acct." --- if you transferred the funds into an existing account that you had in your name, then you may have tax issues.

Only a spouse who inherits IRAs may retitle them into his/her own name. Other IRA beneficiaries may transfer inherited IRA accounts, the but the account has to be styled something like, Deceased's Account for the benefit of Beneficiary.

Unless you had an existing beneficiary account from some other inherited IRA, I do not see how you could have transferred the inherited IRA to an existng account without triggering a distribution and tax liability.

Perhaps I am misunderstanding.

Regards, JAFO

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Author: shaggydown Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110029 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 2:11 PM
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Thank you for those kind words. The information was helpful. The title is indeed a new acct all together, titled; inherited benefiary Ira, (first and last name of original holder)-deceased.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110030 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 2:41 PM
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shaggydown: "Thank you for those kind words. The information was helpful. The title is indeed a new acct all together, titled; inherited benefiary Ira, (first and last name of original holder)-deceased."

Your welcome.

And now that I understand better, I agree with IRA's prior response, what happens in an IRA account generally stays in as IRA account.

Regards, JAFO

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110031 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 3:43 PM
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This account is tax deferred, and I will have to take withdrawls starting 2011, based on life expectency, etc. Since transferred I've sold out of mutual funds and have purchased in and out of stocks. Are there any tax reporting implications that I'll have due to moving out of mutuals?



Condolences.

i take it from the above that you understand that you have RMD because your parent was older than 70.5


.. *i* found that to be a pain in the bookkeeping ...

i think i'm right that you have the option of emptying the account over 5yrs. (hope that helps)


=

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110035 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 5:58 PM
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i take it from the above that you understand that you have RMD because your parent was older than 70.5


.. *i* found that to be a pain in the bookkeeping ...

i think i'm right that you have the option of emptying the account over 5yrs. (hope that helps)


The requirement to take an MRD has nothing to do with the age of the parent though the method for calculating it does.

There shouldn't be any problem with the "bookkeeping" as it's a simple calculation done once a year. Most IRA custodians will do the calculation for you.

The 5 year option is always there.

Ira

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110036 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 6:40 PM
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The requirement to take an MRD has nothing to do with the age of the parent though the method for calculating it does.


o, i got the impression somewhere that had [my] Mom been under RMD age (she wasn't), i would have had to worry about RMDs till *i* reached RMD age,

AND ...


There shouldn't be any problem with the "bookkeeping" as it's a simple calculation done once a year. Most IRA custodians will do the calculation for you.


i wasn't confident whose age/table to use -- mine or Mom's

..and the 'Custodian' was no help.
...sent my glossy folder that said, "Read Pub.590"




The 5 year option is always there.



glad i got that right at least



(>:

...just read pub 590 again ..it still sounds like a pain <g>

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110037 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 7:47 PM
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...just read pub 590 again ..it still sounds like a pain <g>

It's really very simple.


1. Get the right table (that's probably the hardest part)
2. Find your age (or sometimes the original owner's age) in the table
3. Look at the number next to the age.
4. Divide the previous year-end balance in the IRA by the number from step 3.
5. Withdraw that amount from the IRA

Lather, rinse, repeat each year.

--Pedro <== has lost track of the next permutation at this point in tax season.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110038 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 9:47 PM
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--Pedro <== has lost track of the next permutation at this point in tax season.

Don't you wish you had a simple name like Ira - only six permutations. <g>

Ira

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110039 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 9:56 PM
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1. Get the right table (that's probably the hardest part)
2. Find your age (or sometimes the original owner's age) in the table
3. Look at the number next to the age.
4. Divide the previous year-end balance in the IRA by the number from step 3.
5. Withdraw that amount from the IRA

Lather, rinse, repeat each year.



yes. 'which table?' --hard to determine

but 'rinse, repeat' --a PITA ..for life

maybe if i'd inherited a larger IRA, it wouldn't have seemed such a pain.


just sayin' -- OP should be aware of the options

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110040 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 10:13 PM
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yes. 'which table?' --hard to determine

A little bit, for those who only do this once in a lifetime. Fairly trivial for a tax pro.

And you only need to do it once. Once you've got the right table, you just keep using that table. If you even need to look at the table again. For an inherited IRA, you often just subtract 1 from last year's divisor.

Not exactly what I'd call a PITA, unless your perception of a complicated tax return is dealing with TWO W-2s in one year.

just sayin' ;-)

--Pierre

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110041 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 10:15 PM
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Don't you wish you had a simple name like Ira - only six permutations. <g>

But then there's the lifetime of constantly being mistaken for a retirement plan. Or an activist political group in the British isles. ;-)

--Paul

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110042 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 10:17 PM
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Ooops. Almost forgot.

just sayin' -- OP should be aware of the options

On this point, I agree completely.


--Peter <== too serious a reply for fooling around on this one.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110043 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 10:59 PM
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The original owner was over 59 1/2, which means there is no early withdrawl penalty. If it is a small IRA, couldn't you just take a distribution for the entire amount. Obviously, if there is a significant balance this isn't a good choice.

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110044 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 11:10 PM
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And you only need to do it once. Once you've got the right table, you just keep using that table. If you even need to look at the table again. For an inherited IRA, you often just subtract 1 from last year's divisor.

Not exactly what I'd call a PITA, unless your perception of a complicated tax return is dealing with TWO W-2s in one year.

just sayin' ;-)



heh.


now i think on it...

TMI: in the space of about 3 months (6 yrs ago), i got laid off, Mom died (not unexpectedly) and i ended up in hospital myownself for a week. So i was trying to decide between find-work and 're-tire' .. feeling guilty my sis had been left with dealing with mortuary and realty .. recovering from surgery -AND when Mom's broker said, "don't forget to deal with RMD's on your Mom's IRA..." it just FELT like too much



-b
...... no permjutations

...wonder what TurboTax does with inherited IRA <g>

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110045 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/9/2010 11:19 PM
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The original owner was over 59 1/2, which means there is no early withdrawl penalty. If it is a small IRA, couldn't you just take a distribution for the entire amount. Obviously, if there is a significant balance this isn't a good choice.



sounds right.

no Penalty, but there is the income tax.

this is what my sister did with her part of Mom's IRA -- distrib whole thing and pay tax.

i tried to avoid that tax .. ended up spreading the distrib and tax over 5 years.



=

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110047 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 1:25 AM
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The original owner was over 59 1/2, which means there is no early withdrawl penalty.

The age of the original owner is completely irrelevant. There is never an early withdrawal penalty from a beneficiary IRA.

Ira

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110048 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 1:29 AM
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...wonder what TurboTax does with inherited IRA <g>

Why would you wonder? The details are in the 1009-R box 7 codes. Once you feed TurboTax the correct code it knows that the distribution is taxable and exempt from early distribution penalties.

Ira

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110049 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 1:43 AM
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...wonder what TurboTax does with inherited IRA <g>

Why would you wonder? The details are in the 1009-R box 7 codes. Once you feed TurboTax the correct code it knows that the distribution is taxable and exempt from early distribution penalties.



but seems to NOT calculate /or even ask about RMD.

..the rest it gets ,as you say, from the Code

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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110050 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 1:49 AM
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Hey Pedro & Ira

--Pedro <== has lost track of the next permutation at this point in tax season.

Don't you wish you had a simple name like Ira - only six permutations. <g>

Ira

================================================================================

Don't you wish you had a simple name like Ira - only six permutations. <g>

But then there's the lifetime of constantly being mistaken for a retirement plan. Or an activist political group in the British isles. ;-)

--Paul


LMAO !!!!

With only 5 or 6 days left (depending on time zone) till 4/15 I have to hand it to you two guys still keeping your great sense of humor !!! or is it? ...hmmmmm ... that you two have already cracked up ;) (lol) .. To think of it I haven't seen Phil as of late ... hopefully he hasn't gone off the deep end.

Just kidding guys :) Keep up your great work here.

Rich .... no permutations puh-leaze (smiling)

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110052 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 2:11 AM
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but seems to NOT calculate /or even ask about RMD.

Correct, because the RMD is irrelevant to completing your tax return. The IRS knows whether you've complied because it gets the 12/31/xx balance from the custodian via Form 5498. It knows your age from your SSN and it can calculate the RMD and compare that amount to the entries you made on lines 15/16 of Form 1040.

There may be something in the planning modules or worksheets that will calculate the RMD for you. Professional tax preparation software provides this capability.

Ira

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110056 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 2:28 AM
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or is it? ...hmmmmm ... that you two have already cracked up ;) (lol)

I won't speak for Ira, but I'm generally in a permanently cracked up condition. I just hide it well when I'm not dead tired. ;-)

.. To think of it I haven't seen Phil as of late ... hopefully he hasn't gone off the deep end.

For his sake, I hope he has gone off the deep end. He's retired. Not working for pay. Living off the dole. Something like that. He just answers questions. If he's lucky, he will have been drinking plenty of those clear liquids he keeps suggesting, along with some good 'cue now that Spring is more or less here.

--Panos

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110061 of 121177
Subject: Re: Tax issues re: inherited Ira Date: 4/10/2010 3:53 PM
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but seems to NOT calculate /or even ask about RMD.

Correct, because the RMD is irrelevant to completing your tax return. The IRS knows whether you've complied because it gets the 12/31/xx balance from the custodian via Form 5498. It knows your age from your SSN and it can calculate the RMD and compare that amount to the entries you made on lines 15/16 of Form 1040.



cool.

or d'oh -- RMD doesn't show up in 1040 ..only any distribution. (as you say)

rare case where IRS says you must ACT in some way (rather than pay)

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