I noticed your another question about inherited
For income tax purposes - inheritance is not taxable income - so neither the estate nor beneficiaries are responsible for income taxes
on the inheritance.
However the distribution from IRA account is classified as income in respect of the decedent (IRD) - and that is taxable income upon distribution - because the distribution will take place AFTER the death.
Income in respect of the decedent is gross income
that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return
. Income in respect of a decedent realized AFTER the death is taxable the same way as it were taxable for the decedent.
Income in respect of a decedent must be included in the income of one of the following.
--The decedent's estate, if the estate receives it.
--The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it.
--Any person to whom the estate properly distributes the right to receive it.
Because your mother's estate is the beneficiary of the IRA - that income will be reported on the income tax return of the estate - and likely will be passed to beneficiaries.
When distributed - that amount is reported on form
1099R - which will report amounts of total distribution and taxable amount
- AND the amount that was withheld
- from 1099R box 1 - total distribution
- from 1099R box 2a - taxable part of the distribution - if your mother made any after tax contributions - that amount would not be included. Otherwise - amounts in box 1 and box 2a will be equal.
- from 1099R box 4 - that is the amount of tax withheld which is credited toward tax liability.
On form 1041 the taxable portion is reported on line 8 as Other income. If passed to beneficiaries - the taxable amount is deducted on line 18 and reported to beneficiaries on K1 forms - line 14.
There are certain rules
related to inherited IRA - generally you may spread distribution over several years and might be able to avoid large taxable income in any single year.
To accomplish that - you may rollover funds into so-called "inherited IRA" and spread distribution over several years - thus effectively will reduce and defer your tax liability.
Let me know if you need any details.