Question

Which of the following best completes this sentence? Shirley, age 52, takes an early distribution from her traditional IRA. The 10% penalty tax will not apply to the extent that qualified education expenses were paid to an eligible educational institution for Shirley or her: a)Spouse or dependent child. b)Spouse, dependent child, or dependent grandchild. c)Spouse, child, or grandchild. d)Spouse, child, grandchild, or parent.

Answer 1

Spouse, child, or grandchild. (which is Option C)

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Explanation:

As per the applicable rules, 10% penalty tax applicable on early distribution taken from traditional IRA (on or before 59.5 years) will not apply to the extent the qualified educational expenses are incurred for self, spouse, children or grandchild. It is not necessary that the child or grandchild should be dependant. Therefore, Option C is correct.

Option A is incorrect as it includes dependant child.

Option B is incorrect as it dependent child, or dependent grandchild

Option D is incorrect as it includes parent.