IRS REVENUE RULING CONCERNING TAXATION OF LUMP SUM DISTRIBUTION FROM IRA TO NON-SPOUSE BENEFICIARY

July 1, 1992 TO: PENSION MEMBERS NO. 16-92 RE: IRS REVENUE RULING CONCERNING TAXATION OF LUMP SUM DISTRIBUTION FROM IRA TO NON-SPOUSE BENEFICIARY __________________________________________________________ Attached is a copy of Revenue Ruling 92-47, which explains the federal income tax consequences of a lump sum distribution from an IRA to a non-spouse beneficiary. The ruling addresses a situation in which the decedent had not received any distributions from the IRA prior to his death and the assets in the IRA increased through appreciation and income between the date of death and the date of distribution to the beneficiary. The balance on the date of death, minus the decedent’s nondeductible contributions, constitutes both income under section 408(d)(1) of the Code and income in respect of a decedent under section 691(a)(1) that is includible in the gross income of the beneficiary for the taxable year in which the distribution is received. Under section 691(c), the beneficiary may claim a deduction for the portion of the federal estate tax on the decedent’s estate that was attributable to the income included under section 691(a). (The revenue ruling also notes that a surviving spouse beneficiary would have been permitted to roll the distribution over into another IRA under section 408(d)(3)(C) and avoid current inclusion.) The excess of the lump sum distribution over the balance in the IRA at the owner’s death does not constitute income in respect of a decedent under section 691(a) and instead is taxable to the beneficiary under sections 408(d) and 72 of the Code. We will keep you informed of further developments. Kathy D. Ireland Associate Counsel -Pension Attachment