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Tax Planning/Inheritance Distribution


Sir, My step-father passed away in Dec 2011. I am not his legal son (not sure if that makes a difference).  I have received a distribution from his trust.  The distribution is in the form of a check.  The letter from the trust administration says that a portion of the distribution is from an IRA distribution and that I will receive a K-1 shortly.  Can I rollover the portion that is from the IRA distribution into my traditional IRA or into an Inheritance IRA or other type of IRA?  Since the monies from this IRA were disbursed to other designated beneficiaries, I was not given any opportunity how I wanted to receive this distribution (i.e. lump-sum, 5-yr disbursement or life-expectancy).  If I cannot roll-over, will I have to claim as income on my 2013 tax return or will I have to pay an inheritance tax? I live in the state of Virginia.

Mike - This is slightly out of my area, but I will try and answer as best I can.  

I believe that usually, in order to have a direct rollover to an inherited IRA, you had to be the direct beneficiary.  From what you describe, it was probably the estate or trust that was the beneficiary and in that case, the proceeds were paid to the estate and the individual beneficiaries from the estate will pay the tax on it.  I don't believe that there would be any penalties.

You will have the amount that shows up on your K-1 from the trust or estate as income on your return.  Whether or not you pay taxes on that money will depend on your overall tax situation.

I hope this helps.  

Tax Planning

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


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