In PLR 201330011 the IRS determined that the assignment of two IRAs to two charities in satisfaction of its share of the residue of an estate and a trust would not be deemed transfers under section 691(a)(2) so only the charities would include the resulting income in respect of a decedent in gross income when they receive the IRA distributions.
The facts presented were:
Decedent’s Will dated Date 2 provides that all assets included in the residue of the Decedent’s estate shall be paid over to the Trust. Article II of the Trust provides that, upon the death of Decedent, Charity 1 shall receive a% of the residue of the Estate and Charity 2 shall receive b% of the residue of the Estate. Article III of the Trust provides that the trustee shall have the power to make allocations, divisions, and distributions or trust property in cash or in kind, or partly in each, and to allocate different kinds or disproportionate shares of property or undivided interests in property among the charitable beneficiaries.
Bank is both the personal representative of the Decedent’s estate and the trustee of Trust. Bank, as personal representative and trustee, intends to assign and transfer all of the IRAs to Charity 1 and Charity 2 in accordance with Article II of Trust (the Proposed Transfers). A ruling is requested under § 691 that the Proposed Transfers will not be transfers within the meaning of § 691(a)(2).
The ruling goes on to state:
Section 1.691(a)-4(b) of the Income Tax Regulations provides that, if the estate of a decedent or any person transmits the right to IRD to another who would be required by § 691(a)(1) 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 § 691(a)(2) has not occurred.
Section 1.691(a)-4(b)(2) 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.
Rev. Rul. 92-47, 1992-1 C.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 § 691(a)(1) that is includable in the gross income of the beneficiary for the tax year the distribution is received.