IRS written determination 201430022

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
'APR 3 0 Z014
Uniform Issue List: 401.06-01, 408.03-00, 691.00-00
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Legend:
Trust
=
* * *
Decedent
=
* * *
IRAW
=
* * *
IRA X
=
* * *
IRAY
=
* * *
IRAZ
=
* * *
Financial Institution
=
* * *
Trustee/Beneficiary A
= * * *
Trustee/Beneficiary B = * * *
Dear***:
This is in response to your request dated November 28, 2012, as supplemented by
correspondence dated April
1, 2013, September 13, 2013, and November 5, 2013, in

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which you request several rulings under sections 401 (a)(9), 408, and 691 of the Internal
Revenue Code (the "Code").
The following facts and representations have been submitted under penalties
of perjury
in support
of the rulings requested.
Decedent established Trust on April
8, 2010. On July 5, 2012, Decedent died at age
84.
At the time of his death, Decedent owned IRAs W, X, Y, and Z, individual retirement
accounts within the meaning of section 408(a) of the Code. Decedent had designated
Trust as the primary beneficiary of IRAs W,
X, Y, and Z. IRAs X, Y, and Z have been
consolidated into IRA W via trustee-to-trustee transfer.
You represent that Trust is valid under state
law, and that a copy of Trust was delivered
to Financial Institution prior to October 31, 2013. Trust became irrevocable upon
Decedent's death. The Trust's document provides that, after certain specific
distributions that have already been satisfied prior to the filing of this request, the
balance
of Trust shall be distributed to 19 individual beneficiaries. The Trust provides
that the interest
of one of the 19 beneficiaries shall be established as an educational
trust, and you represent that it shall be funded by Trust from non-IRA assets
of Trust,
leaving 18 remaining beneficiaries for purposes of this request ("the 18 remaining
beneficiaries"). One
of the 18 remaining beneficiaries was born prior to Decedent, and
all survived him. None
of the 18 remaining beneficiaries is Decedent's surviving
spouse.
Trustee/Beneficiary A and Trustee/Beneficiary B are the trustees of Trust and each is
also one
of the 18 remaining beneficiaries of Trust.
Trustee/Beneficiary A and Trustee/Beneficiary B now propose to divide IRA W via
trustee-to-trustee transfers into 18 inherited IRAs (the "Inherited IRAs"), one for the
benefit of each of Decedent's 18 remaining beneficiaries, each
in the name of
Decedent.
Based on the above, you request the following letter rulings:
1. That Trust constitutes a "see-through" trust within the meaning of section
1.401 (a)(9)-4
of the Income Tax Regulations ("Regulations"), Q&A-5;
2. That division of IRA W by means of trustee-to-trustee transfers into the 18
Inherited IRAs
in the name of Decedent: (a) will not result in taxable distributions
or payments under section 408(d)(1) of the Code, and (b) will not constitute a
transfer causing inclusion
in the gross income of Trust or either
Trustee/beneficiary under section
691 (a)(2) of the Code;
3. That Trustee/Beneficiary A and Trustee/Beneficiary B may each receive the
required minimum distributions under section
401 (a)(9) of the Code from his or
her respective
Inherited IRA using the life expectancy
of Decedent; and

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2f)1430022
4. That the separate account rules within the meaning of section 1.401 (a)(9)-8 of
the Regulations, Q&A-2, are not available to the beneficiaries of Trust with
respect to Trust's interest
in Decedent's benefit.
With respect to your first ruling request, section 408(a) of the Code provides the rules
governing IRAs. Section 408(a)(6) provides that, under regulations prescribed by the
Secretary, rules similar to the rules of section
401 (a)(9) of the Code and the incidental
death benefit requirements of section
401 (a) shall apply to the distribution of the entire
interest
of an individual for whose benefit the trust is maintained.
Section
401 (a)(9)(A) of the Code provides, in general, that a trust will not be considered
qualified unless the plan provides that the entire interest of each employee--
(i) will be distributed to such employee not later than the required beginning
date, or
(ii)
will be distributed, beginning not later than the required beginning date, over
the life of such employee
or over the lives of such employee and a designated
beneficiary (or over a period not extending beyond the life expectancy
of such
employee
or the life expectancy of such employee and a designated
beneficiary).
Section
401 (a)(9)(B)(i) of the Code provides, in general, that if an employee dies after
distribution of his interest has begun
in accordance with section 401 (a)(9)(A)(ii) (after
his required beginning date), the remaining portion of his interest must be distributed at
least as rapidly as under the method of distribution being used as of the date
of his
death.
Section 401 (a)(9)(C)
of the Code provides, in relevant part, that, for purposes of section
401 (a)(9), the term "required beginning date" means April 1 of the calendar year
following the calendar year
in which the employee attains age 70 1/2.
Section
401 (a)(9)(E) of the Code provides that for purposes of section 401 (a)(9), the
term "designated beneficiary" means any
individual designated as a beneficiary by the
employee.
Section 1.408-8
of the Regulations, Q&A-1 (a), provides, in relevant part, that IRAs are
subject to the required minimum distribution rules under section
401 (a)(9) of the Code
and that
in order to satisfy section 401 (a)(9), the rules of section 1.401 (a)(9)-1 through
1.401 (a)(9)-9
of the Regulations must be applied, except as otherwise provided.
Section 1.401 (a)(9)-4 of the Regulations, Q&A-1, provides, in relevant part, that a
designated beneficiary
is an individual who is designated as a beneficiary under the
plan. An individual may be designated as a beneficiary under the plan either by the
terms
of the plan or, if the plan so provides, by an affirmative election by the employee
(or the employee's surviving spouse) specifying the beneficiary. Under these
Regulations, a designated beneficiary need not be specified by name
in the plan in

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201430022
order to be a designated beneficiary so long as the individual who is to be the
beneficiary is identifiable under the plan. The member of a class of beneficiaries
capable of contraction or expansion will be treated as being identifiable if it is possible to
identify the
class member with the shortest life expectancy. Further, the passing of an
employee's interest to an individual under a will or otherwise under applicable state law
will not make that individual a designated beneficiary under section
401 (a)(9)(E) of the
Code
unless that individual
is designated as a beneficiary under the plan.
Section 1.401 (a)(9)-4 of the Regulations, Q&A-3, provides that only individuals may be
designated beneficiaries for purposes of section
401 (a)(9) of the Code. A person who is
not an individual, such as the employee's estate, may not be a designated beneficiary.
Section 1.401 (a)(9)-4 of the Regulations, Q&A-4, provides,
in relevant part, that in order
to be a designated beneficiary, an
individual must be a beneficiary as
of the date of the
employee's death. Generally, an employee's designated beneficiary for purposes
of
determining the distribution period for required minimum distributions after the
employee's death will be determined based
on the beneficiaries designated as of the
date of death who remain beneficiaries as of September 30 of the calendar year
following the calendar year
of the date of death (e.g., have not received their entire
interest before that September 30).
Section 1.401 (a)(9)-4 of the Regulations, Q&A-5, provides that where a trust is named
as a beneficiary
of an employee, beneficiaries of the trust with respect to the trust's
interest
in the employee's benefit may be treated as designated beneficiaries if the
following requirements are met:
(1) The trust is valid under state law, or would be but for the fact there is no
corpus.
(2) The trust is
irrevocable or will, by its terms, become irrevocable upon the·
death
of the employee;
(3) The beneficiaries of the trust who are beneficiaries with respect to the trust's
interest
in the employee's benefit are identifiable within the meaning of A-1 of
this section from the trust instrument.
(4)
Relevant documentation has been timely provided to the plan administrator.
Such a trust as described
in Section 1.401 (a)(9)-4 of the Regulations, Q&A-5, is often
referred to as a "see-through" trust.
Section 1.401 (a)(9)-4
of the Regulations, Q&A-6(b), provides, in relevant part, that the
trustee must provide the plan administrator a copy
of the actual trust document by
October
31 of the calendar year immediately following the calendar year in which the
employee died.
You have represented that Trust is valid under state law and that it became irrevocable
upon the death of Decedent. Furthermore, the identity of each person entitled to
receive any portion
of IRA W upon Decedent's death is determinable under the

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provisions of Trust. Finally, you represent that a copy of Trust was timely given to
Financial
Institution, the administrator of IRA W.
Therefore, with respect to your first ruling request, we conclude:
1. That Trust constitutes a "see-through" trust within the meaning of section
1.401 (a)(9)-4 of the Regulations, Q&A-5.
With respect to the first part of your second ruling request, section 408(d)(1)
of the Code
provides
generally that,
in accordance with the rules of section 72 of the Code, amounts
paid or distributed from an IRA are included
in gross income by the payee or distributee.
Section 408(d)(3)(A) of the Code provides that paragraph (d)(1)
of section 408 does not
apply to any amount paid or distributed out of an
IRA to the individual for whose benefit
the
IRA is maintained
if--
(i) the entire amount received (including money and any other property) is paid
into an IRA for the benefit of such individual not later than the 60th day after
the day on which the individual receives the payment or distribution,
or
(ii) the entire amount received (including money and any other property) is paid
into an eligible retirement plan (other than an IRA) for the benefit
of such
individual not later than the 60th day after the date on which the payment
or
distribution is received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount received which is
includible
in gross income (determined without regard to section 408(d)(3) of
the Code).
Section 408(d)(3)(C)
of the Code provides, generally, that amounts from an "inherited" ·
IRA cannot be rolled over into another IRA.
In general, an "inherited" IRA is an IRA
maintained by an individual who acquired the IRA by reason
of the death of another if
the acquiring individual is not the surviving spouse of such individual.
Revenue Ruling 78-406, 1978-2 C.B. 157 ("Rev. Rul. 78-406"), addressed the direct
transfer
of funds from one IRA trustee to another IRA trustee where both IRAs were
held by the same IRA owner, and provided that the transfer did not constitute a payment
or distribution includible
in the gross income of the participant. Furthermore, such a
transfer does not constitute a rollover contribution described
in section 408(d)(3)(A) of
the Code.
Therefore, with respect to the first part of your second ruling request, we conclude:
2.(a) That the division of
IRA W by means of trustee-to-trustee transfers into the 18
Inherited IRAs
in the name of Decedent will not result in taxable distributions or
payments under section 408(d)(1) of the Code.
With respect to the second part of your second ruling request, section
691 (a)(1) of the
Code provides that the amount
of all items of gross income in respect of a decedent

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201430022
which are not properly includible in respect of the taxable period in which falls the date
of his death or a prior period (including the amount of all items of gross income in
respect of a prior decedent, if the right to receive such amount was acquired by reason
of the death of the prior decedent or by bequest, devise, or inheritance from the prior
decedent) shall
be included in the gross income, for the taxable year when received, of:
(A) the estate
of the decedent, if the right to receive the amount is acquired by the
decedent's estate from the decedent; (B) the person who, by reason of the death
of the
decedent, acquires the right to receive the amount, if the right to receive the amount is
not acquired by the decedent's estate from the decedent; or (C) the person who
acquires from the decedent the right to receive the amount by bequest, devise,
or
inheritance, if the amount is received after a distribution by the decedent's estate of
such right.
Section
691 (a)(2) of the Code provides that if a right, described in paragraph (1 ), to
receive an amount is transferred by the estate of the decedent or a person who
received such right by reason of the death of the decedent or by bequest, devise,
or
inheritance from the decedent, there shall be included in the gross income of the estate
or such person, as the case may be, for the taxable period in which the transfer occurs,
the fair market value of such right at the time of such transfer plus the amount by which
any consideration for the transfer exceeds such fair market value. For purposes
of this
paragraph, the term "transfer" includes sale, exchange,
or other disposition, or the
satisfaction of an installment obligation at other than face value, but does not include
transmission at death to the estate
of the decedent or a transfer to a person pursuant to
the right
of such person to receive such amount by reason of the death of the decedent
or by bequest, devise, or inheritance from the decedent.
Section 1.691 (a)-1 (b) of the Regulations provides that the term "income in respect of a
decedent" ("IRD") refers to those amounts to which a decedent was entitled as gross
income, but which were not properly includible in computing the decedent's taxable
income for the taxable year ending with the date of the decedent's death
or for a
previous table year under the method of accounting employed by the decedent. Section
1.691 (a)-1 (c) provides that the term "income in respect of a decedent" also includes the
amount
of all items of gross income in respect of a prior decedent, if (1) the right to
receive such amount was acquired by the decedent by reason
of the death of the prior
decedent
or by bequest, devise, or inheritance from the prior decedent and if (2) the
amount
of gross income in respect of the prior decedent was not properly includible in
computing the decedent's taxable income for the taxable year ending with the date of
his death or for a previous taxable year.
Section 1.691 (a)-4(a) of the Regulations provides that
in general, the transferor must
include
in his gross income for the taxable period in which the transfer occurs the
amount
of the consideration, if any, received for the right or the fair market value of the
right at the time of the transfer, whichever is greater.
Section 1.691 (a)-4(b) of the Regulations provides that if the estate of a decedent or any
person transmits the right to income
in respect of a decedent to another who would be

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required by section 691 (a)(1) of the Code to include such income when received in his
gross income, only the transferee
will include such income when received in his gross
income. In this situation, a transfer within the meaning of section 691 (a)(2) has not
occurred.
Section 1.691 (a)-4(b)(2) of the Regulations provides that if a right to
IRD is transferred
by an estate to a specific
or residuary legatee, only the specific or residuary legatee
must include such income
in gross income when received.
Revenue Ruling 92-47, 1992-1
G.B. 198, holds that a distribution to the beneficiary of a
decedent's IRA that equals the amount of the balance
in the IRA at the decedent's
death, less any nondeductible contributions,
is IRD under section 691 (a)(1) of the Code
that is includable
in the gross income of the beneficiary for the tax year the distribution
is received.
Therefore, with respect to the second part of your second ruling request, based solely
on the facts and representations submitted, we conclude:
2.(b) That the division
of IRA Wand establishment of the 18 Inherited IRAs will not
constitute a transfer within the meaning of section
691 (a)(2) of the Code. The
beneficiaries will each include,
in their gross income, the amounts of IRD from
their respective Inherited IRA when the distribution or distributions from the
Inherited IRAs are received.
With respect to your third ruling request, section 1.401 (a)(9)-4 of the Regulations, Q&A-
4, provides in relevant part that, in general, in order to be a designated beneficiary, an
individual must be a beneficiary as
of the date of death. The employee's designated
beneficiary for purposes
of determining the applicable distribution period will be
determined based on the beneficiaries designated as of the date of death who remain
beneficiaries as of September
30 of the calendar year following the calendar year of the
employee's death.
Section 1.401 (a)(9)-4 of the Regulations, Q&A-5(c), provides that if the trust has more
than one beneficiary, the rules under section 1.401 (a)(9)-5 of the Regulations, Q&A-7,
determine which beneficiary's life expectancy shall be used to determine the distribution
period.
Section
1.401 (a)(9)-5 of the Regulations, Q&A-5(a), provides,
in relevant part, that if an
employee dies after distribution of his interest has begun (generally on or after the
employee's required beginning date), in order to satisfy section 401 (a)(9)(B)(i) of the
Code, the applicable distribution period for distribution calendar years after the
distribution calendar year containing the employee's date of death is, if the employee
has a designated beneficiary as of the date determined under section 1.401 (a)(9)-4
of·
the Regulations, Q&A-4, the longer of--

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(i) The remaining life expectancy of the employee's designated beneficiary;
and
(ii) The remaining life expectancy of the employee.
Section 1.401 (a)(9)-5 of the Regulations, Q&A-7(a), states that if more than one
individual is a designated beneficiary, the designated beneficiary with the shortest life
expectancy will be the designated beneficiary for purposes
of determining the applicable
distribution period.
Section
1.401 (a)(9)-9 of the Regulations, Q&A-1, sets forth the "Single Life Table," to be
used to determine the life expectancy
of an individual.
Under the
t~rms of Trust, the 18 remaining beneficiaries are the remaining beneficiaries
of IRA Was of September 30, 2013. One of these individuals was born before
Decedent and thus has a shorter remaining
life expectancy than the remaining life
expectancy of Decedent.
Therefore, with respect to your third ruling request, we conclude:
3. That Trustee/Beneficiary A and Trustee/Beneficiary B may each receive the
required minimum distributions under section
401 (a)(9) of the Code from his or
her respective Inherited IRA using the life expectancy of Decedent.
With respect to your fourth ruling request, section 1.401 (a)(9)-4 of the Regulations,
Q&A-5(c), provides,
in relevant part, that the separate account rules under section
1.401 (a)(9)-8
of the Regulations, Q&A-2, are not available to beneficiaries of a trust with
respect to the trust's interest
in the employee's benefit.
Section 1.401 (a)(9)-8
of the Regulations, Q&A-2(a)(2), provides that, if an employee's
benefit
in a defined contribution plan is divided into "separate accounts" in accordance
with the conditions contained therein, distributions from the separate account may be
based on the life expectancy of the beneficiary
of the "separate account" without regard
to the life expectancies of the beneficiaries of other separate accounts.
Therefore, with respect to your fourth ruling request, we conclude:
4. That the separate account rules within the meaning of section 1.401 (a)(9)-8 of
the Regulations, Q&A-2, are not available to the beneficiaries of Trust with
respect to Trust's interest
in Decedent's benefit.
This ruling letter is based
on the assumption that IRAs W, X, Y, and Z, and the IRAs to
be established, met or will meet the requirements
of section 408(a) of the Code at all
relevant
times. Furthermore, this ruling letter is based on the assumption that Trust is
valid under state law as represented, and that the actions taken by Trustee/Beneficiary
A and Trustee/Beneficiary B regarding Trust that are described
in this ruling are
authorized and
valid under Trust and state
law.

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201430022
This letter is directed only to the taxpayer who requested it. Section 611 O(k)(3) of the
Code provides that it may not be used or cited as precedent.
Pursuant to the power of attorney
on file with this office, a copy of this letter ruling is
being sent to your authorized representative.
If you wish to inquire about this ruling,
please
contact*********** at(***)***-***. Please address all correspondence
to SE:T:EP:RA:T2.
Enclosures:
Deleted
copy
of ruling letter
Notice of Intention to Disclose
cc: * * *