Hello,

I have a new client. Father passed away five years ago. His IRA did not have any designated beneficiaries, so the IRA has just been sitting untouched. The five year rule goes into effect on 12/31/22, so a final distribution needs to be made to the client soon.

My question is who is paying taxes on this final distribution -- the estate or the individual beneficiary? Morgan Stanley says they can only assign the IRA to the (still open) estate, and then a final distribution to my client can be made.

I am confused as to whether this needs to be reported as taxable income for the estate on a Form 1041, or if it will be reported as ordinary income to my client.

Thanks.