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Posted by Drew.Blaha on May 3, 2008, 6:26 pm
Please log in for more thread options On May 3, 1:25 pm, bl...@triad.rr.com wrote:
> Between my tax class and settling my mother's estate, I've been here
> alot lately.
> Thank you all for your help.
>
> Now - with my mother's estate, I am inheriting a traditional IRA
> valued at about 20K. The plan was to take it and put it into an
> inherited IRA, taking the minimum required distribution each year and
> decaring it on my income taxes. Now, as I;m stufing for finals, I see
> in my book mention of a "seldom used and usually misunderstood"
> section of the tax code, 691(c), that will allow me to take a misc
> deduction for the amount of tax that is paid by the estate for the
> value of the IRA. If I understand the book correctly, the estate tax
> paid on the traditional IRA (45% of 20K), could be a deduction on my
> incomce taxes.
>
> However, if I stretch out the IRA, the deduction would have to be
> taken each year based on the amount of my distribution. The
> calculations sound like they could really get messy. As such, am I
> better off taking the whole distribution in one year and taking the
> full 45% of 20K as a deduction?
>
> That's what I trying to figure out right now. Any input would be
> appreciated.
>
> Thank you for your time.
>
> ========================================= MODERATOR'S COMMENT:
> - it's referred to as 'income in respect of a decedent', and you
> may be right. But it is complicated, and for such a small sum, you may
> want to take the withdrawal. If her estate owes tax, you are suggesting it
> was worth over $2M, in which case you want to focus on the the rest to be
> sure all is done right.
>
> --
> That said, can you give some indication of what the procedure is to calculate
the deduction if I did use an inherited IRA and took the income over time? In
theory I could be a CPA in a year, and should be able to handle these
calculations, but I can't find mention of it anywhere; just that its
'complicated'. I would think it would be good to stretch out the claiming of
taxable income, but if I can get a 45% deduction this year, compared to nothing
over the years because its too complicated to figure, maybe I should take the
lump sum.
--
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