inherited dead mom ira

[jslimmers]

inherited a ira from deceased mom put into 17mos cd  bank sent no tax papers

,my brother took $ right out bank sent tax form his tax man said totally taxable as regular income 

he paid tax on it 

I was told it was not taxble  if i take $$ out in october when it matures do i pay tax on all $ or only on $i i  take out? etc etc   thank you !!

[PaulaM]

If you took cash from the IRA and invested it in a CD, then yes that would make the retirement distribution taxable. Did you receive a 1099-R?

[jslimmers]

No

[jslimmers]

no

[PaulaM]

Please clarify if you took a distribution from your mom's IRA.

[jslimmers]

the bank transfered or made me a cd which matures this upcoming october

so would all be taxable if i take some out or just the $$ i take out?

[beyondthebox]

I believe the expectation was that you were supposed to roll it into an IRA or take as a distribution. Did you remove the money from the inherited IRA or did they just send you a check?

I am surprised that the originating IRA company did not file paperwork with the IRS. You might want to contact them. If they reported it as a distribution, then you will have to pay tax. It was the job of the origination IRA company to provide you with options, not just send you the cash.

[beyondthebox]

If you signed documents to convert the IRA to a CD then that is a distribution. If its been less that 60 days, have the bank undo this action and roll the money on your behalf into a new or existing IRA.

[KrisD15]

There are two things going on here.

The first thing, when your mom passed away and left the IRA, you should have been given only two choices:

1. Open an "Inherited IRA" and deposit the funds into that

2. Cash out the account

If you did not open an "Inherited IRA", then you cashed out and should have received a 1099-R for the distribution

The second thing, you opened a CD. You are asking about the tax on the CD. 

The amount you deposited into the CD won't be taxed, because you should have been taxed on the distribution from the IRA. 

The earnings will be taxed when you withdraw. 

Usually a CD is all rolled over for another term or all distributed, but you'll need to talk to the bank about that and how they handle CD's.

I think what they may have told you is that there will be a penalty if you try to tap into the CD before the term is met. 

THERE IS ONE MORE OPTION-

The bank may have opened an Inherited IRA from the funds in your mom's IRA, THEN they could have had your Inherited IRA invest in a CD. 

I suggest you go to the bank and have them sit down and explain all of this to you.

Most people do not understand these things, so you should not feel silly asking, and it is the bank's job to explain everything to their customers. 

@jslimmers 

[dmertz]

If you received no Forms 1099-R, it seems that your share of the inherited IRA was moved to inherited IRA CDs by nonreportable trustee-to-trustee transfer which is the only way that an IRA inherited by a non-spouse beneficiary can be moved.  Moving the funds to inherited IRAs means that the income continues to be deferred but you will usually have annual required minimum distributions and will have to completely distribute these inherited IRAs by the end of the 10th year following the year of your mother's death (although there as some circumstances where the distribution requirements may be different).