Danielle,who is retired,reaches age 70 1/2 in 2011,and she will also be age 71 in 2011.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2012?
A) $0.
B) $9,804.
C) $19,608.
D) $150,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Danielle is subject to Required Minimum Distributions (RMDs) because she has reached age 70 1/2. The first RMD must be taken by April 1 of the year after the year in which she reaches age 70 1/2. Since she reaches age 70 1/2 in 2011, her first RMD must be taken by April 1, 2012. The amount of the RMD is calculated by dividing the account balance by the life expectancy factor provided by the IRS. In this case, the RMD would be $9,804 ($150,000 divided by 15.3). Option A is incorrect because Danielle is required to take a distribution. Option C is incorrect because the RMD would be less than $19,608. Option D is incorrect because the entire account balance cannot be distributed as the RMD.

Danielle,who Is Retired,reaches Age 70 1/2 in 2011,and She Will