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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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My Mother left my me a beneficial IRA after passing last

Customer Question

My Mother left my me a beneficial IRA after passing last year. I set up the new account in my name and have to take the minimum disbursement because she was 70 + when she passed and took disbursements.
My question is, do I have to calculate Fed and Maryland State tax on the amount? I am setting up a yearly withdraw until the account is empty.
As a side note, I will be rolling these funds into my IRA that I cannot touch. I am 57
Thank you,
Mark
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

If the IRA is not a ROTH IRA, the distributed amount will be taxable as ordinary income. So, the answer is yes, you would need to calculate federal and state taxes on the distributed amount. If a ROTH IRA, the distributed amount is not taxable.

Rolling the funds over does not create a taxable event, however, taking a distribution does create a taxable event. SEE BELOW:

  • Generally, you must take distributions during your lifetime or within five years after the original account holder passed away.
  • With an Inherited Traditional IRA, you’ll pay taxes on any distributions you take.
  • Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs.
  • With an Inherited Roth IRA, you don’t pay taxes on distributions.

REFERENCE SOURCE:

http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/inherited_ira/withdrawal_rules

Let me know if you require further assistance with this matter.