Income in respect of a decedent (IRD) is gross income the decedent had a right to receive but did not include on a final return because it was unpaid at death-examples include unpaid wages, IRA distributions, accrued interest, and deferred compensation. IRD retains its character and is taxable to the recipient (estate, beneficiary, or trust) when received. If the item was subject to estate tax, the recipient may claim an income-tax deduction for the portion of estate tax attributable to the IRD. Proper identification and reporting of IRD avoids double taxation and informs strategies for liquidity, basis planning, and beneficiary cash flow.

Advisors flag IRD items-unpaid bonuses, IRA distributions-and coordinate beneficiary reporting with CPAs. They calculate the 691(c) deduction for estate tax attributable to IRD and plan cash flow so beneficiaries can cover taxes without forced asset sales.