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IRA Beneficiary Can Receive IRA Distributions

IRA beneficiary can receive IRA distributions over her life expectancy after IRA owner's death, although IRA had made distributions over its owner's single life expectancy prior to his death.

When A died, during 1998, he had attained age 70 1/2, the required beginning age under the §401(a)(9) minimum distribution rules. At his death, A owned and individual retirement account (IRA), named IRA X. On a date (Date 2) prior to A's §401(a)(9) required beginning date, A had named his daughter(B) as the beneficiary of IRA X on a beneficiary designation form.

Prior to his death, A received distributions from IRA X based on his single life expectancy, recalculated annually. B wants to receive distributions of the amount remaining in IRA X over her life expectancy, since she is the named beneficiary of IRA X.

The IRS explained that the issue presented is whether post-death distributions from IRA X may be made over B's life expectancy even though IRA X made distributions during A's life over A's single recalculated life expectancy (and not over A's and B's joint life expectancy) without violating the "at least as rapidly" rule of §401(a)(9)(B)(i), as described in Prop. Treas. Reg. §1.401(a)(9)-;1, Question and Answer F-;3A.

The IRS held that B can be treated as the designated beneficiary of IRA X and that A had made a timely designation of B as the beneficiary of IRA X. The IRA explained that A's decision to take distributions over his single life expectancy, rather than over the joint and survivor life expectancy of A and B, accelerated distributions from IRA X. It reasoned that B's election to receive the balance of IRA X over her life expectancy will not violate the "at least as rapidly" rule since A could have used B's life expectancy in selecting the amounts distributed to him.

The IRS found that, when A began to receive distributions from IRA x in 1990, B's life expectancy, under Treas. Reg. §1.72-;9, Table V, was 39.6 years. Since A took distributions from IRA X from 1990 to 1999, nine years of this life expectancy have passed and B's life expectancy is now 30.6 years. The IRS noted that, under Prop. Treas. Reg. §1.401(a)(9)-;1, Question and Answer E-;8, the life expectancy of a nonspouse beneficiary, such as B, cannot be recalculated annually and so will not be reduced to zero for the year following the year of her death. Thus, B could use a life expectancy of 30.6 years to compute the §401(a)(9) required distribution to her in 1999. This life expectancy is reduced by one year for each subsequent calendar year.

Since B's life expectancy is not recalculated annually and so will not be reduced to zero for the year following the year of her death, B's life expectancy remaining at her death (if any) may be used for determining required distributions under §401(a)(9) for the year of B's death and subsequent years.

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