11.16 Reporting Income in Respect of a Decedent (IRD)

If you receive income that was earned by but not paid to a decedent before death, such as wages, IRA and qualified plan distributions, lottery prize winnings, or installment sale proceeds, you are said to have “income in respect of a decedent,” or IRD. You report the IRD on your return. Where the purchaser of a deferred annuity contract dies before the annuity starting date, payments to a beneficiary in excess of the purchaser’s investment are IRD, whether payable in a lump sum or as periodic payments.

If the decedent’s estate paid federal estate tax that was attributable to the IRD you received, you may claim an itemized deduction for the estate tax paid on that income (11.17).