Tax client is the living trust of a decedent. Documents include a 1099-R form with an amount in box 2a, 2b is checked full distribution and box 7 is coded death. Trustee explains that a check for death benefit was received and funds were sent to the trust beneficiary's financial institution for deposit into an inherited IRA account. How would you handle this situation?
I am aware that the trustee mishandled the IRAs, which were intended to be inherited or stretch IRAs for non-spouse beneficiaries. I am interested in learning how you would address the 1099-R on tax form 1041.