IRA inheritance distribution - all taxable?
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TP received $62000 IRA inheritance from her father. She took a full distribution in 2009. 1099R says $62K is taxable and box 2b is checked - tax amount not determinable. We called the bank and this was a 401k rolled over into an IRA and the bank has no record of deposits. TP says all records and paperwork of her father were all disposed of! So we have no statement of his contributions nor any Forms 8606. TP says she's "sure" the IRA contains some nondeductible contributions from after 1986. Her sisters recorded their inheritances and distributions and $0 taxable! Would you be willing to make an estimate of nondeductible contributions based on what the TP "knows." Or should I basically just say "Sorry! No paperwork, no proof" and just go with what the 1099 says and what I think in actuality occurred?
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Helpful Answer
I'd go with zero basis. The sisters are very likely to be audited, and the IRS position will be zero basis. You could end up with a preparer penalty otherwise. Whose bright idea was it to throw away all the old returns?
Inside of a dog, it's too dark to read.
~Groucho Marx
Solved!
I'd go with zero basis. The sisters are very likely to be audited, and the IRS position will be zero basis. You could end up with a preparer penalty otherwise. Whose bright idea was it to throw away all the old returns?
Inside of a dog, it's too dark to read.
~Groucho Marx
Answer
Sorry, sent too soon...
IRS will have transcripts of returns going back a number of years. If your client will give you POA, you can get them. If the client balks at this...red flag.
Inside of a dog, it's too dark to read.
~Groucho Marx
Answer
I agree with ArchieLeach. The distribution will be fully taxable unless you have some paperwork to show that the IRA has some basis in it. (See page 5 of Instructions Form 8606 for what records you need to verify the nontaxable part of distributions from an IRA)
Answer
I agree with ArchieLeach and sweetpea40, and as Archie Suggested obtain a POA if necessary so you can obtain recored from the IRS
Comment
Great! Thank you for your answers. I'll see what I can find out from IRS records and if not... I know what I have to do. Thanks again.