Karl Irvin wrote:
- quote -

No, it's not.

If he removes the value of the IRA from the estate and
recomputes, and that recomputation results in a tax of zero,
but there was an estate tax with the IRA included, it means
that ALL of the estate tax is available for apportionment
among the various IRD items (or just the IRA if there are no
other IRD items).

The question above would only be correct if NONE of the
estate tax were attributable to the IRD items (including the
IRA). Try re-reading IRC 691(c)(2) "Method of Computing
Deduction."

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"Karl Irvin" <88karl3200[at]comcast.net> wrote:
- quote -

Oops. I mis read you question

If without the IRA (and other IRD items) the estate tax is
zero and with the IRD items, the estate tax is 20,000, the
estate tax attributable to the IRD items is 20,000 and
that's the deduction that can be taken as the IRD items are
reported as income.

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- quote -

Karl, there would still very likely be a deduction. If
there is no estate tax if the IRA is NOT included on the
706, but there IS estate tax when the IRA is included, there
IS estate tax on the IRA. Though I don't think that anyone
has mentioned that the deduction for estate tax on IRD is
only for the FEDERAL estate tax that was paid on the IRD.

Vida Freeman, EA

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"Len Schwer" <NoSpam[at]Sonic.net> wrote:
- quote -

That's correct.

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Karl Irvin wrote:
- quote -

Be warned that the above is oversimplified. It fails to
account for the following factors that will impact the
computation:
- Other IRD items receivable. It's not just "with and w/o
the IRA."
- Items allowable as an income tax deduction AND as a claim
against the estate (e.g. due but unpaid property taxes,
state income taxes, etc.).
- Any previously taxed basis in the pension/IRA (which
affects one of the ratios in the computation for how
much is considered IRD). Remember that the estate
includes the present value WITHOUT regard to previously
taxed basis.

Don't forget that computation for AMT purposes may result in
a different amount, especially on account of state/local
taxes, both the unpaid liabilities and any receivable
recoveries due. [Big moan here since software doesn't deal
with this.]

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"Karl Irvin" <88karl3200[at]comcast.net> wrote:
- quote -

Thank you Karl for the clear response!

If I deduct the value of the IRA from the estate and it
falls below the $1M cutoff, does this mean that although
estate taxes were paid on the IRA there is no deduction?

I don't doubt your claim that the IRA: "needs to be based on
the valuation used in the estate to eliminate the effect of
growth or loss in value since the estate valuation." but as
a practical matter, regardless of the IRA valuation used,
since the full deduction will be used in a few years, the
current valuation should only produce a slight increase in
the annual deduction and simplified the bookkeeping.

Thanks again for taking the time to respond and for the nice
explanation.

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"Arthur Kamlet" <kamlet[at]panix.com> wrote:
- quote -

This deduction is based on the Estate tax attributable to
the IRA. You have to calculate the Estate tax with (as it
was filed) and without the IRA in the Estate. The difference
in the Estate tax is the Estate tax attributable to the IRA.
Then figure the percentage of the IRA distributed to you
each year values and mutiply that percentage times the
Estate tax attributable to the IRA to get the misc itemized
deduction amount. In making the percentage calculation above
the amount the IRA distributed to you each year needs to be
based on the valuation used in the estate to eliminate the
effect of growth or loss in value since the estate
valuation.

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Len Schwer wrote:

- quote -

See IRS Pub 559 starting on page 11 for the computation of the
estate tax deduction on income in respect of the decedent.
http://www.irs.gov/formspubs/page/0,...91,00.html#T44

--

Alan
http://taxtopics.net

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Arthur Kamlet <ArtKamlet[at]aol.REMOVE.com> wrote:
- quote -

I apoligize for my answer. I had assumed only the portion of
the estate tax attributable to the distribution was
deductible and that you were asking about deducting the
entire distribution rather than the applicable portion. On
rereading, and on reading the other replies, I need to
retroactively withdraw my answer. (Hey, if the politicians
can do it, why not me????)

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Len Schwer" <NoSpam[at]Sonic.net> wrote:

- quote -

The initial calculation has to be done by the executor (or
preparer of the estate tax return). Then you should be
informed as to the dollar amount (limit) of the deduction,
and the percentage of each distribution that constitutes the
deduction, subject to the lifetime limit.

Barry Picker, CPA/PFS, CFP

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Len Schwer wrote:

- quote -

It is not an easy computation. I can send you a "live"
schedule of such that this year passed the muster of the
local IRS counsel's office - only after much discussion and
several referrals (questions) out from counsel to an estate
& tax examination group. That issue got settled before the
Tax Court trial came around. Unfortunately, this is one of
those things where the IRS should create and produce a form
but hasn't.

IRS Examination probably had a problem with it because they
didn't understand Revenue Ruling 88-118, which was how the
IRD distribution (in this case, from a 401(k) plan) was
computed. The ruling's method was similar to the "general
simplified rule" that was in effect prior to 1994, but has
some quirks of its own. - and it got worse when it was
learned that the original pensioner fell into the July 3,
1986 - December 31, 1986 transitional rule of the Ruling!

Why this issue was classified for an OFFICE AUDIT
examination is another mystery! All they get is a 2 hour
"awareness slot" during training on the issue - and that
doesn't go into the special computation for periodic
payments.

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Len Schwer <NoSpam[at]Schwer.net> wrote:

- quote -

In my experience "someone" probably led to to this gross
misunderstanding.

So I would go back to "someone" and get the reference. I
can't help you here.

And while you're at it, please ask "someone" to stop giving
out so many different misleading pieces of advice.

To paraphrase Rosanne Rosanadana, "It's always Someone."

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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I inherited an IRA from my parent, now it is a Beneficiary
IRA. Estate taxes were paid on the IRA.

I understand I can take a deduction (Schedule A
Miscellaneous not limited to 2% of gross) for the annual
Required Distribution from this IRA.

Can someone point me to an example of calculating the
Schedule A Miscellaneous deduction for such a Beneficiary
IRA withdrawal?

Thanks, --len

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