2stepsbehind wrote: If a person on 5/1/11 is awarded 50 performance units of a company stock which is set to vest 5/1/13, the person passes away 5/1/12, but the company goes ahead and pays out the 50 units as scheduled on 5/1/13 is it true that the value of the 50 units on 5/1/3 would be considered ordinary income to the estate...? Same hypo, but instead the company pays out the performance units to the spouse of the deceased; it would still be ordinary income, but this time to the spouse, correct? Would the spouse be eligible to open a spousal ira based on this payment?
I'm not sure it would be proper, but if the employer decides to pay any portion of a deceased employee's unpaid compensation to the surviving spouse, the income should not be reported in the form of "compensation" to the surviving spouse. The deceased employee performed the services, and "earned income" is not transferable from one individual to another. And if the employee died 5/1/12 and the income was paid to the surviving spouse on 5/1/13, the surviving spouse will be filing single in 2013 and there is no spousal IRA contribution for a taxpayer filing single.