Updated July 22, 2015
Income in Respect of Decedent Chicago Illinois
Income in respect of a decedent is all amounts to which the decedent was entitled in gross income, but which were not included in computing taxable income on the final return. Examples would be salary which was earned but not paid by the date of death by a cash method taxpayer. Collection after death of an account receivable by a cash method taxpayer after the date of death is also IRD. Gain on the sale of a property by a cash method taxpayer that was not not received before the date of death is also IRD. There are many others…
IRD is reported by the person or entity which receives the income. If it is received by an estate or a trust, then it is designated as fiduciary income. Once it is designated as IRD, it is always reported on a cash basis.
Income in Respect of a Decedent has the same character that it would have had in the hands of the decedent. The right to receive IRD has a transferred basis. The basis is not stepped up to Fair Market Value on the date of death, which is generally the case for property. IRD is taxable as income to the recipient and is includable in the gross estate. Any instances of double taxation may be mitigated by deductions.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.