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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 585
Experience:  10 years experience
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I'm receiving my dads irs > step mother moved to england

Customer Question

I'm receiving my dads irs > step mother moved to england (which she held ira account) both passed now I'm receiving> england wants 40% inherence tax. plus US wants same/ who should i y
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: talk to
JA: Is there anything else the Accountant should be aware of?
Customer: getting taxed on both ends is that legal
Submitted: 11 days ago.
Category: Tax
Expert:  Lane replied 11 days ago.

Hi. My name's Lane

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IRS will always tax the I.R.D. (Income in Respect of a Decedent) because the dollars are pre-tax, taxes have never been paid on those dollars (income was paid, but the portion that was deferred into a retirement plan was not taxed) - IF you distribute the funds as opposed to tolling them into your own inherited IRA.

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Said differently, when the dollars finally come out of the IRA is when the dollars are finally taxed.

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That HMRC wants inheritance tax on an IRA is not correct.

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What I'd strongly recommend that you do is roll into an inherited IRA and only take the distributions over your life expectancy (or that of you latest surviving parent, if they were already taking required minimum distributions).

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This way, you'll only be taxed on the income as is comes out. HMRC WILL tax the income if you are resident in the UK, but you can file a US tax return to take the foreign tax credit for the tax paid to UK.

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Same thing happens if you decide to distribute (just a much larger one time amount... likely putting you in the highest US Tax bracket.

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But inheritance tax is charged against assets transferred into our name, not income.

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And both UK and US (and the US/UK double taxation treaty) treat IRA dollars as income when distributed, not as assets.