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Old 02-18-2014, 12:50 PM
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Inherited IRA distribution

I liquidated assets from a beneficiary IRA that was registered in a trust. These assets had been held by my mother in annuities and she was 75 yrs old when she passed away this past august. I have been advised that when these assets are divided among the beneficiaries of the trust that we should all make an estimated payment and that we will receive a K1 form to report the amount each of us receive as regular income for 2014. My question is do I need to hold out a percentage to cover taxes that will be due on the distribution from the TRUST? I should receive a 1099 for the trust based on the distribution of the assets, and that would be offset by the K1 form amounts, but should I hold back a percentage or make an estimated payment for the Trust to cover the distributed assets? In other words, will the assets be taxed on the trust as well as the individual returns?



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Old 02-19-2014, 03:04 AM
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Originally Posted by jctrumble1 View Post


#1;I liquidated assets from a beneficiary IRA that was registered in a trust. These assets had been held by my mother in annuities and she was 75 yrs old when she passed away this past august. I have been advised that when these assets are divided among the beneficiaries of the trust that we should all make an estimated payment and that we will receive a K1 form to report the amount each of us receive as regular income for 2014. My question is do I need to hold out a percentage to cover taxes that will be due on the distribution from the TRUST?



#2; I should receive a 1099 for the trust based on the distribution of the assets, and that would be offset by the K1 form amounts, but should I hold back a percentage or make an estimated payment for the Trust to cover the distributed assets?


#3;In other words, will the assets be taxed on the trust as well as the individual returns?
#1;I guess so; sch k1 of 1041 means each benefciiary’s percentage to cover taxes.
Inheriting an IRA from other(besides your spouse) means you must take the inheritance immediately. You must choose between an immediate lump-sum distribution, a distribution over five years or a lifetime distribution. In all cases, you pay income tax on the income as you receive it. You cannot defer the income tax. The only exception to paying taxes on an IRA is if the original IRA holder made designated R-ira contributions to the IRA. You may also pay inheritance taxes on your IRA, regardless of whether you receive a Roth or traditional IRA. This inheritance tax varies by state.but paying inheritance taxes on ira d/b is very rare.so i f you received the IRA from someone other than your spouse, you can withdraw all of the money at one time, paying the necessary taxes at once. Or you can withdraw it over your lifetime, paying taxes only on the amounts you receive each year or you need to pay quarterly estimated taxes aslongas your marginal tax rate is lower than your tax liability on the income including the distributions.




#2;as mentioned above; you should receive the reporting form 1099-R with distribution code in the box 7 ,4-Death an d that distribution would be taxable for you. The money would have been taxable to your mother, but since she didn't pay, the beneficiaries get to.

#3;yes . you need topay tax on the gain of the sale of the assets that you disposed of. For example,selling your assets,i.e., home for a large profit can be exciting until you consider the possibility of having to pay a large tax bill on the capital gain. Yu need to report it on sch d/8949 on 1040.



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