My sisters and I inherited our father's IRA as his named beneficiaries. However, the IRA was the main asset in his taxable estate, accounting for over 80% of it's value. Therefore, we will have to tap the IRA for a sizeable amount to pay estate taxes. Is any of this deductible?

You have to pay income tax on the IRA withdrawn to pay the estate taxes. However there is an itemized deduction available for the estate taxes attributable to the IRA, which can be taken to offset the taxable income of the IRA withdrawal.

Ask the attorney or accountant who handled the estate to give you the numbers you need.

Is there some other way to pay the estate tax, so as to prolong the income tax deferral (assuming you would otherwise be able to stretch out the IRA benefits)?

As Barry noted, the attorney handling the estate should be advising you on how to handle this. That's what he/she is getting paid for.

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Bruce Steiner, attorney
(212) 986-6000 (NY office)
(201) 862-1080 (NJ office)
also admitted in FL