Income in respect of a decedent
Certified Financial Planner glossary · Certified Financial Planner
Definition
Income earned by a decedent but not taxed before death; carries no basis step-up and generates a Section 691(c) deduction.
Income in respect of a decedent in plain English
Dad dies holding an unpaid bonus and a traditional IRA. The heirs expect a basis step-up to erase the income. Income in respect of a decedent is income the decedent earned but that was not taxed before death; it carries no basis step-up and can generate a Section 691(c) deduction for estate tax attributable to the IRD item. Retirement accounts and accrued compensation are classic IRD. If someone applies step-up thinking to untaxed earned income, they have missed IRD.
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