Discussion:1041 Non-qualified annuity loss

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Discussion Forum Index --> Basic Tax Questions --> 1041 Non-qualified annuity loss
Discussion Forum Index --> Tax Questions --> 1041 Non-qualified annuity loss

Jwvancpa (talk|edits) said:

12 April 2009

Client's father left will of property which included some stock, 2 non-qualifed plans and an IRA. The 2 non-qualified plans and the IRA were paid out to the estate in December and distributed to the beneficiaries. The 2 non-qualified plans have a contribution amount in Box 5 exceeding the amount in Box 1. I understand this is a 2% itemized deduction if paid directly to the beneficiary, but if paid to the estate does the estate get to pass this loss out to the beneficiary?

Kevinh5 (talk|edits) said:

12 April 2009

In this example, the loss on the annuities would be deductible by the estate (subject to the 2% rule). Since the annuities didn't have 'income' any distribution from these funds would be non-taxable to the beneficiary.

It is unusual, though, for someone to name his 'estate' as the recipient of his IRAs and non-qualified annuities. This is an unnecessary subjecting these accounts to probate, which could have been avoided had the decedent just named the beneficiaries on each account.

Jwvancpa (talk|edits) said:

12 April 2009

I thought this was unusual as well. This was just dumped on me last minute by my client who is the executrix. The will just says "all his assets are to be divided equally amoung his 4 children". My guess is he had not named the beneficiaries on the contract.

1) If this was the case could the Executor have had them divide the amounts equally and by passed the estate?

2) I just want to make sure I understand this. The deduction would go on line 15b and would offset the income form the IRA on Line 8. The balance would be deducted as a distribution to the beneficiaries on K-1's and result in no tax to the estate.

Thanks for your help during this busy season.