Question

In order to avoid a penalty for failure to receive a minimum distribution from a defined contribution plan in 2023, a taxpayer must take her first minimum distribution for the later of which of the following years? (Check all that apply.)

a) 2020
b) 2021
c) 2022
d) 2023

Answer 1

To avoid a penalty, a taxpayer must take the first minimum distribution from their defined contribution plan by April 1 of the year following the year they turn 72. The distribution for 2023 must be taken by April 1, 2024, if they turn 72 in 2023. Therefore the correct answer is d) 2023

Step-by-step explanation:

In order to avoid a penalty for failure to receive a minimum distribution from a defined contribution plan in 2023, a taxpayer must take her first minimum distribution by April 1 of the year following the calendar year in which they turn 72. Therefore, if the taxpayer turned 72 in 2023, they would need to take their first distribution by April 1, 2024, and this would be considered the distribution for 2023. On the other hand, if the taxpayer turned 72 in 2022, they would need to take their first distribution by April 1, 2023, which would be for the year 2022. Thus, the correct answers would be for the years they turned 72 or retired, whichever is later. Given the options provided, the latest year by which a first minimum distribution must be taken to avoid penalty would be d) 2023.