Question

donna turned 74 on january 7th of 2025. her profit-sharing account balance was $100,000 at the end of 2024 and $150,000 at the end of 2025. her beneficiary is her older sister, robin, who turned 82 years old on july 2nd of 2025. assume that the life expectancy factor based on the uniform lifetime table for someone who is 73, 74, and 75 is 26.5, 25.5 and 24.6, respectively. if donna only takes a distribution of $2,000 for 2025, then how much is her minimum distribution penalty (assume that the failure is not corrected during the correction window)? group of answer choices $480.39. $960.78. $980.39. $1,921.57.

Answer 1

Donna's minimum distribution penalty for 2025 is $3,882.35.

Step-by-step explanation:

To calculate Donna's minimum distribution penalty, we need to determine her required minimum distribution (RMD) for 2025 and compare it with the amount she actually distributed ($2,000).

The RMD is calculated by dividing the account balance at the end of the previous year ($150,000) by the life expectancy factor.

Since Donna turned 74 in January 2025, we use the life expectancy factor for a 74-year-old, which is 25.5.

So the RMD for 2025 is $150,000 / 25.5 = $5,882.35.

Since Donna only distributed $2,000, her distribution was less than the RMD. The penalty for not taking the full RMD is 50% of the shortfall, which is $5,882.35 - $2,000 = $3,882.35.

Therefore, Donna's minimum distribution penalty is $3,882.35.