roth and estate

[TAXMAN]

There was no named beneficiary on the roth IRA that TP had for 10 years. Only estate listed as beneficiary. When preparing form 1041 should this ROTH income be counted as Tax Free? EXEC is doing a first and final 1041. The 1099 has it listed as taxable with a code of T. Thanks for the help.

[rfassett]

Code T simply means that the issuer of the 1099 R does not know whether the five year holding period has been met and the participant (in this case) has died.  My guess is the issuer erred by listing a taxable amount.  Your options are to request a corrected 1099 R (kinda like spittin' into the wind) or file the return as you know it to be correct and deal with the IRS notice if and when it shows up.

[jklcpa]

On 10/7/2016 at 3:16 PM, TAXMAN said:

There was no named beneficiary on the roth IRA that TP had for 10 years. Only estate listed as beneficiary. When preparing form 1041 should this ROTH income be counted as Tax Free? EXEC is doing a first and final 1041. The 1099 has it listed as taxable with a code of T. Thanks for the help.

The fact that this was paid to the estate is irrelevant to determining how much of the distribution is taxable. The estate would use the same holding period requirement and ordering rules as the individual would have if paid out while the owner was still alive. 

[TAXMAN]

Had the TP cashed it b4 death it would have been all tax free. When the TP died the adm witinin 2 months cashed the Roth so that they could begin dispersing funds and paying bills. Does this mean that the earnings b4 death and after death would be taxable to the estate(form 1041)? I am now confused. Thanks