- quote -


1. You're correct, that was a bad choice of wording for me. I can
close the inherited IRA and take the cash. That would give me a 9K
misc deduction all at once. And, at that point I would have the cash
to put into a Roth IRA. Totally seperate, unlinked transaction, but
that is what I would probably do with the money. I'm not making
enough on my own right now to contribute to an IRA, but if the money
became available, that's what I would do with it.

2. And what is the formula that is used, based on withdrawals? If I
withdrawal 10% of the IRA, do I use up 10% of the 9K deduction I have
available? And the next year, if I withdraw 15%, I use 15% of the
remaining deduction? That seems like a reasonable approach, but I
haven't been able to find the formula in the tax code.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<Drew.Blaha[at]itg-global.com> wrote in message
news:c4293412-0a2e-4107-8671-404f3d2637cf[at]p25g2000hsf.googlegroups.com...
- quote -

1) The $20K is ALREADY in an inherited IRA, so what do you mean by
"withdraw and put it into...?"

2) The ETD is based on how much of the IRA you actually withdraw each year.
It is NOT S/L'ed unless that's what you did with the amount actually
withdrawn.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

I'm getting this, slowly.
You said:

- quote -

Yes, the IRD is fixed, in my example $20,000.
Yes, the ETD is fixed at $9000 in my overly simplified example.
That
number can be determined.
If I take the 20K this year, I get $9k itemized misc deduction.

If I put the 20K into a inherited IRA, and would take just the RMD
each year, how do I allocate the $9k over the years? I assume the
IRS
tables will tell me how many years I have to drain the IRA. Do I
just
take a straight line proportion each year, or will it be based on
the
RMD, which I know would vary each year based on investments?

Thank you for all your help, I am trying to learn this stuff.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<blaha[at]triad.rr.com> wrote in message
news:f08d18de-9840-4178-bc37-debb4f6c1131[at]m36g2000hse.googlegroups.com...
- quote -

It is a simple formula based on the amount of the distribution as it
compares to the amount used in the IRD computation to determine the
attributable estate tax. It's not a complicated formula, nor is it based
over time. However, as you suggested that the payments would be RMDs, that
implies that the ETD would be a fixed number each year as the IRD itself
would be fixed.

- quote -

No. You are still ignoring income-tax-deductible liabilities, as I stated
above. Whether you take it in parts or all at once doesn't alter that an
ETD is still present. As far as "take what's left ...", you can't put it
into another IRA that way. You don't get the rollover option either as the
IRA was held by your parent, not your spouse. As noted (in your simplified
view), 45% of $20K (which will probably be close to the correct number) is
$9k, and if you're single, that by itself exceeds your standard deduction if
distributed in a single year.

If you screw it up, don't worry - the IRS really doesn't understand this
either. I've had audits where the item was an issue and some ended up as:
"What's this?" "Turn to Section 691 in the IRC." "Oh." (issue done).
Office audit especially doesn't even know where to start in doing the
computation. I've had other audits where they've disallowed it because they
don't understand it at all, just for me to get it back in appeals. The last
time, the case was already docketed, and IRS district counsel (I guess
they're called "local counsel" now) actually referred it to an estate and
gift revenue agent group (usually GS-13's), and 3 weeks later they suggested
that DC concede the issue as correct.

Lastly, note: Some states don't allow the ETD deduction - or substitute the
state inheritance tax amount for the federal amount.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On May 3, 9:39*pm, "D. Stussy" <s...[at]bde-arc.ampr.org> wrote:
- quote -

"For payments over time, the estate tax is further allocated over the
period designated."


But - is this a complicated formula that will be dependant on the
amount of the distribution from the inherited IRA, or is it just a
straight line percentage based on the number of years I would be
getting a distribution?

And the fact that I may not be able to itemize in future years is
another point to take into consideration.
THIS IS TOO COMPLICATED!!

So - I can ignore the whole mess, just take an inherited IRA and get
the tax deferral and tax free growth, or take it all at once and get
the misc itemized deduction. The deduction being the amount of tax
the estate paid based on the value of the IRA. This should be just
asking the lawyer to run the return with out the IRA, (I believe,
hope, there are no other IRD items in the estate), and then the
difference will be the tax attributed to the IRA. Take what's left
and put it into an IRA, or vinyl siding.

Right??

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Bill Brown" <brownwp[at]longwood.edu> wrote in message
news:1067f115-1e29-4753-8640-5e9606cf7de6[at]c58g2000hsc.googlegroups.com...
- quote -

Wrong. The ETD is NOT subject to the 2% AGI floor. - IRC 67(b)(8).

Also, the OP's assumption that the estate tax attributable to this IRD is
simply going to be the estate tax bracket percentage of the IRD is wrong.
The computation is alot more complicated than that. Firstly, the estate tax
attributable to ALL IRD is the difference between return estate tax and
estate tax recomputed by excluding all IRD and all liabilities deductible
for income tax purposes per 691(b). For IRD purposes, any post-tax basis
(for an IRA, non-deducted contributions) are taken into account. Once the
estate tax on all IRD is determined, it is allocated by simple ratio to each
IRD item according to its amount. For payments over time, the estate tax is
further allocated over the period designated.

- quote -

Agreed, but also note that as this is an itemized deduction, it is also
subject to whether one's total itemized deductions will exceed the standard
deduction in future years. Amortizing the ETD isn't the messy part.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On May 3, 1:25*pm, bl...[at]triad.rr.com wrote:
- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On May 3, 1:25*pm, bl...[at]triad.rr.com wrote:
- quote -

miscellaneous deductions which are reduced by 2% of adjusted gross
income.

- quote -

You will have to run the numbers for both alternatives. Technically,
you should consider the time value of money in making your final
decision.

Good luck.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

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.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >