Question

Doland turned 72 on January 7th of Year 2.

His profit-sharing account balance was $200,000 at the end of Year 1 and $250,000 at the end of Year 2.   

Assume that the life expectancy factor based on the uniform lifetime table for someone who is 70, 71, 72, and 73 is 27.4, 26.5, 25.6 and 24.7, respectively.

If Donald only takes a distribution of $5,000 for Year 2, then how much is his total corrective distribution?

$4,765.

$2,812.

$7,812.

$4,219.

Answer 1

Doland turned 72 on January 7th of Year 2; therefore Life Expectancy Factor for him is 25.6

Account Balance at the end of Year 2 = $250,000

Required minimum distribution (RMD) = Account Balance at the end of Year 2/ Life Expectancy Factor (for 72 year)

= $250,000 /25.6

= $9,765.625

If Donald only takes a distribution of $5,000 for Year 2,

Then his total corrective distribution = required minimum distribution (RMD) – distribution taken

= $9,765.625 - $5,000

= $4,765.625 or $4,765

Therefore correct answer is option: $4,765