Income in Respect of Decedent

It’s important to be familiar with the concept of Income in Respect of Decedent or IRD.

Why? As a beneficiary, you can get an income tax deduction for federal estate taxes paid on the IRD you receive. IRD is money that passes through to an estate or individual beneficiary as income in respect of the decedent that was due to that deceased person.

An IRD deduction may be available to beneficiaries for certain inherited assets to help offset double taxation from federal estate and income tax.  Even the beneficiary of an inherited IRA may be eligible to claim an IRD deduction – this is a deduction that many IRA beneficiaries miss!

Keep in mind that state estate taxes are not deductible. Income in respect of decedent refers to amounts of gross income not included in the taxable income computation for a decedent. You are taking over the basis of the decedent (carryover).

Do you think you may be eligible for an IRD deduction? Your personal CPA can answer your questions and help you review your documents. Your CPA can also calculate the IRD amount for you to help ensure it is accurate and that you get the deduction you are eligible for.

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