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Inherited IRA and Estate Tax

In 2000 my wife inherited a traditional pretax IRA, along with other assets. The IRA was modest ($12,000 in value) and we are planning to make a complete distribution of the IRA this year (we are in a low tax bracket for one year only, and this makes sense for us). I recently read that estate taxes paid can be used as an income tax deduction against the IRA income I will realize this year.

From what I read, I must allocate the estate taxes to the assets

inherited. Is this correct? And how would I have allocated the estate tax to stocks and real estate that was appraised and received at FMV?

More importantly, I am not sure we have any estate tax to use in this situation. State tax of $5634 was assessed on the estate. The Federal return form 706 (July 1999 version) shows a gross estate tax on line 10 of $226,000 which is completely offset by the unified credit and the state taxes paid. Even if there was no Federal estate tax paid, does the State tax paid qualify?

Thanks.

Andy

Reply to
WJB57
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Not quite correct. The marginal estate tax attributable to all items that are receivables constituting income must be allocated across them. Assets which do not represent IRD are allocated zero.

No.

As there's no net estate tax after the unified credit, there's no tax to allocate.

Reply to
D. Stussy

Thanks - I was afraid that was the answer......

Reply to
WJB57

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