Income in Respect of a Decedent

AuthorSeymour Goldberg
ProfessionSenior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
Many clients have retirement assets. These retirement assets as well as
other deferred income type assets may be subject to double taxation un-
less the advisor is aware of the IRD deduction. This section covers the
effective use of the IRD deduction in order to reduce the income tax
liability for the beneficiary of retirement assets.
hoW the ird deduCtion Works
Gross income of a decedent which was not includable in a Form 1040 of
the decedent prior to his death because he is on the cash basis is income
in respect of a decedent. This includes amounts of gross income in re-
spect of a prior decedent if the decedent’s right to receive such amount
was acquired by reason of the death of a prior decedent or by bequest,
devise, or inheritance from the prior decedent. [IRC Sec. 691(a)(1).]
Income in respect of a decedent is taxable in the year when received.
The character of the income is based upon the nature of the income
that it would have had in the hands of the decedent if the decedent had
lived and received such amount.
A person who includes an amount of income in respect of a dece-
dent is allowed a deduction for the federal estate tax attributable to the
income in respect of a decedent.
The federal estate tax attributable to IRD is based upon the dece-
dent’s highest marginal federal estate tax. It is computed by determining
the federal estate tax with the IRD in the estate and determining the
federal estate tax without the IRD. The difference is the federal estate
tax attributable to the IRD.
The recipient of IRD has the same basis for income tax purposes
that the decedent had prior to his death. No step- up in basis is permitted
even though the estate shows the value of IRD as an asset in the estate.

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