chapter Gerry is 70% on April 1 of the current year and must receive a minimum d

Question

chapter Gerry is 70% on April 1 of the current year and must receive a minimum distribution from his qualified plan. The account balance had a value of $423,598 at the end of last year. The distrnbution period for a 70 year old is 27.4, and for a 71 year old it is 26.5. If Gerry takes a 95.00 distribution next April 1st, what is the amount of the minimum distribution tax pemalty associated with his first year's distribution? a. b. $230. c. $492. d. $985. ualifind plan account with a balance of fciary of the L anef

Explanation / Answer

Ans is c $492

Since Gerry is 70 ½ on April 1st and by next year Gerry reaches age of 71 ½ , for a person aged 71 years distribution period is 26.5, so Required minimum distribution from plan should be 423,598 ÷ 26.5 = 15984.83

Distribution made of $15,000 , so shortage in RMD is 984.83 over 15000, any shortage in RMD is taxed at 50%, so minimum distribution tax penalty will be 984.83 x 50% = $492.42 or $492

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