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This is my understanding; please correct me if I'm wrong:

Regarding income tax on an inherited traditional IRA:
- If the spouse inherits, s/he can roll it into his/her own IRA, and have no tax due at the time of rollover, but will still have to pay income tax on distributions later on, when the money is withdrawn.
- If the children inherit, they have to pay income tax when they inherit.


Consider yourself corrected. No one pays income tax at the time they inherit an IRA, only when distributions are taken. Surviving spouses have some additional flexibility in choosing the timing of distributions.

Ira
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