IRA Distributions

Question 1

Colin, age 34, is a beneficiary of a Traditional IRA. Colin wants to take a lump-sum distribution. He has provided a death certificate verifying the IRA owner’s death. Because Colin is 34 years old, will he incur the early distribution penalty tax?

Answer 1

No

Question 2

Kathy, age 39, has a Traditional IRA. The financial organization holding Kathy’s Traditional IRA received Form 668-A, Notice of Levy, from the IRS. After verifying that the IRS levy did apply to Kathy’s Traditional IRA, the financial organization distributed$3,000 from her IRA. Does Kathy appear to meet an exception to the early distribution penalty tax?

Answer 2

Yes

Question 3

Aaron, age 42, states that his adjusted gross income is approximately $100,000. He has unreimbursed medical bills thattotal $3,000 for the year. Aaron wants to distribute the $3,000 from his Traditional IRA. Does Aaron appear to meet an exception to the early distribution penalty tax?

Answer 3

No

Question 4

Erika, age 37, was recently injured in an automobile accident. The accident has left Erika totally disabled. Erika would like to distribute $625 to pay her mortgage. Does Erika appear to meet an exception to the early distribution penalty tax?

Answer 4

Yes

Question 5

Nate and Kate, who are both 58 years old, just got married. Nate currently owns the home that they live in. Kate has never owned a home. Nate and Kate each want to take a distribution of $8,000 to use as a down payment on their new home. Does Nate appear tomeet an exception to the early distribution penalty tax? Does Kate appear to meet an exception to the early distribution penalty tax?

Answer 5

No (for both)

Question 6

Carolyn, age 46, is distributing $3,500 from her IRA. She is taking the distribution to pay for her daughter’s tuition and books for medical school. Currently, these education expenses exceed$15,000. Does Carolyn appear to meet an exception to the early distribution penalty tax?

Answer 6

Yes

Question 7

Donna, age 54, is currently unemployed. Donna would like to distribute $7,000 from her Traditional IRA to pay her credit card bill. Does Donna appear to meet an exception to the early distribution penalty tax?

Answer 7

No

Question 8

Frieda, age 38, wants to take a distribution from her IRA to use as a down payment on a car. What steps must Frieda take to accomplish this transaction?

Answer 8

• Complete the withdrawal authorization form - Make a withholding election

Question 9

Natalie has made contributions annually to her IRA for 14 years.She made only nondeductible contributions of $2,000 each year.She has not made any rollover contributions from her retirement plan at work. In 2024, she took a distribution of $4,000 from her Traditional IRA. How much of the $4,000 represented a return of basis if Natalie’s IRA balance at the end of 2024 was $29,000?

Answer 9

$3,393.94

formula:

Question 10

Clark has the following IRA portfolio on December 31 of the distribution year.
IRA #1 - $60,000 rollover in Traditional IRA with ABC Financial Organization ($58,000 pretax and $2,000 after-tax)
IRA #2 $20,000 Traditional IRA with DEF Financial Organization (all deductible contributions and tax-deferred earnings)
IRA #3 - $20,000 Traditional IRA with XYZ Financial Organization($12,000 of nondeductible contributions and $8,000 deferred earnings)
Earlier in the year, Clark took a $10,000 distribution from IRA #2,what amount is excluded from income?

Answer 10

$1,272.73

formula:

Question 11

What is the distribution code that is used to report a 72(t)distribution to a 56-year-old Traditional IRA owner on Form 1099-R?

Answer 11

Code 2

Question 12

What is the distribution code that is used to report a 72(t)distribution to a Traditional IRA owner that is age 59½ or older on Form 1099-R?

Answer 12

Code 7

Question 13

If an IRA owner modifies her 72(t) payments, what distribution code must the financial organization use to report the distribution in Box 7 of IRS Form 1099-R?

Answer 13

Code 1

Question 14

Helen Wilson comes into City Financial Organization to distribute$2,800 from her IRA to pay her credit card bill. Although Helen wants to walk out of the financial organization with $2,800, she also has elected to have 25% withheld for federal income taxes.

Answer 14

$3,733.33

formula:

Question 15

What is the formula used to calculate a required minimum distribution (RMD)?

Answer 15

IRA balance / applicable distribution period

Question 16

What amounts are included in the IRA balance used to calculate the RMD?

Answer 16

Prior Year’s December 31 balance; adjusted for outstanding rollovers or transfers, surviving

Question 17

Which life expectancy table generally is used to determine the distribution period?

Answer 17

Uniform Lifetime Table

Question 18

When is the distribution period based on the Joint Life Expectancy Table?

Answer 18

When the spouse is more than 10 years younger than the IRA owner and the sole primary beneficiary for the entire calendar year.

Question 19

When is the first RMD due?

Answer 19

April 1 of the year following the year the IRA owner attains age 73

Question 20

Joshua, born October 15, 1951, has a Traditional IRA with a December 31 prior-year balance of $145,000. He hasn’t named any beneficiaries. In what year will Joshua need to start taking RMDs?

Answer 20

2024

Question 21

Joshua, born October 15, 1951, has a Traditional IRA with a December 31 prior-year balance of $145,000. He hasn’t named any beneficiaries. What is Joshua’s required beginning date?

Answer 21

April 1, 2025

Question 22

Joshua, born October 15, 1951, has a Traditional IRA with a December 31 prior-year balance of $145,000. He hasn’t named any beneficiaries. What is the amount of Joshua’s first required minimum distribution?

Answer 22

$5,471.70

Question 23

Kimberly, born October 15, 1948, has a Traditional IRA with a December 31 prior-year balance of $237,000. Her sole primary beneficiary is her spouse, Jason, born June 10, 1966. What factors should be considered when calculating Kimberly’s RMD for 2024?

Answer 23

Kimberly’s age
Jason’s age
Jason’s beneficiary status

Question 24

Kimberly, born October 15, 1948, has a Traditional IRA with a December 31 prior-year balance of $237,000. Her sole primary beneficiary is her spouse, Jason, born June 10, 1966. What is Kimberly’s 2024 RMD?

Answer 24

$7,953.02