Money Matters: Income in respect of a decedent

Money Matters

Income in respect of a decedent, what is that?

Well, normally when people receive income, they have to claim it for federal income tax purposes. So, income in respect of a decedent is income that I am entitled to receive but never received it and I passed away. It can be rent, it can be royalties, it can be dividend income, it can be past wages and so I passed away and someone has to pay that tax. I did not receive it because I passed away.

Ok, so, basically how does the process work where it gets passed on? And how does the taxing process work?

So what happens is, and it depends on the persons will and if they opened an estate and how the estate opened so the heir ultimately the person who in receipt of the asset is going to be responible for the tax. So where I see it a lot is in IRAs or you see it in annuity, someone had an annuity. Their basis was the amount they put in and they had some growth and they passed away. Well they never payed tax on that. Well with what is going to be willed to my heirs someone will have to recognize that tax.

And I don't suppose there is any way to get away from having to pay that tax?

No, there is not. It hasn't been tax so it is income in respect of a decedent is what it amounts to.

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