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Forum|Forum|6 years ago
November 3, 2019
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Employee

No, it is not taxable and you do not need any supporting documentation prior to the 2017 year-end statement to determine that. A statement indicating that the decedent established a Roth IRA before the end of 2012 means that the 5-year qualification period began no later than January 1, 2012, so the decedent's Roth IRAs would have completed the qualification period no later than the end of 2016. Any distribution from this inherited Roth IRA in 2017 or later would therefore have been a qualified distribution, entirely tax free and not reportable on Form 8606. The distribution would be includible on 2018 Form 1040 line 4a but entirely excludible from line 4b.

Since the distribution was from an inherited Roth IRA, the Form 1099-R will have either code T or code Q. Code Q indicates that the custodian claims to know that the individual completed the 5-year qualification period. However, some custodians always use code T even if they have the means to determine that the 5-year qualification period was completed, leaving it up to the recipient to treat it as a qualified distribution.

When entering into 2018 TurboTax, be sure to indicate that you inherited the Roth IRA. If the Form 1099-R has code T in box 7, which appears to be the case, make sure that you indicate that the decedent first opened a Roth IRA before 2014. This will cause TurboTax to treat the distribution as a qualified distribution.

D

dmertz

Employee

And to clarify one other thing, the 5-year qualification period began on January 1 of the year for which the decedent first made a contribution to a Roth IRA. The decedent's date of death and the date of the distribution have no bearing on the determination of the 5-year qualification period.

2018 TurboTax asks if the decedent first made a Roth IRA contribution before 2014 because a contribution made for a tax year before 2014 would mean that the qualification period would have begun no later than January 1, 2013, resulting in completion of the 5-year period no later than the end of 2017.