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What Is Income in Respect of a Decedent?


Income can come from many sources, which may continue with or without the person’s direct involvement. This can happen upon death. A person may have been earning income even after their death, and just like every income, this is also taxed.

Income in respect of a decedent or IRD is the untaxed income earned during a deceased person’s lifetime. Ultimately, the tax is forwarded to the individual beneficiary or entity that inherits the income considered.

A more concrete definition of IRD is available in the I.R.C., section 691, detailing sources, such as uncollected salaries, wages, bonuses, commissions, retirement income, accrued interests and dividends, distribution from stock options, and many more. For the surviving heirs or family, it is important to have this aspect covered completely to prevent missed areas that may come back with legal repercussions.

IRDs are taxed as if the individual was alive, and hence, the applicable tax rates, for example, in capital gains or uncollected compensation remain the same. The beneficiaries may need additional support to help them understand the financial and legal concepts.

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