Advanced Underwriting Consultants

Question of the Day – September 1


Question: My client did a conversion of a traditional IRA to a Roth IRA in 2010.  The client intended to do a two year deferral of the income tax into 2011 and 2012, but he recently passed away.  Can his beneficiaries still take advantage of the tax deferral on the conversion?

Answer: No.

The Instructions for IRS Form 8606 for 2010 state

If the taxpayer died during 2010 after making a conversion, the taxable amount of the conversion may not be spread over 2 years (2011 and 2012). The tax return of the deceased taxpayer must show (a) the entire taxable amount in 2010 or (b) a re-characterization (see page 3) of the conversion.

Likewise, if the taxpayer does a conversion in 2010, elects to defer, and dies in 2011, the entire previously unreported amount is taxable in the year of death.


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