Question

If a taxpayer receives an early distribution from an IRA due to disability, he or she will not be subject to a penalty

a. True
b. False

Answer 1

It is true that individuals who receive an early distribution from an IRA due to disability are generally exempt from the 10% early withdrawal penalty. This is conditional upon proving the disability with the certification of a physician who confirms the severe and long-term nature of the condition. The correct answer is option: a. True

Step-by-step explanation:

If a taxpayer receives an early distribution from an IRA due to disability, the general rule is that they will not be subject to the 10% early withdrawal penalty that is typically applied to distributions taken before the age of 59½.

According to IRS guidelines, an individual may claim disability as an exception to the penalty if they can provide proof that they are unable to engage in any substantial gainful activity because of their physical or mental condition.

A physician must determine that the condition can be expected to result in death or to be of long, continued, and indefinite duration. This exception is one of several that allow taxpayers to take distributions from their IRAs under specific circumstances without incurring the penalty.