Question

At age 50, Charles began receiving payments under a distribution method that provides for substantially equal payments over his life. He had no basis in the account. At age 58, after he received distributions totaling $14,000, he elected to receive the remaining benefits in a lump-sum of $155,000. What amount of the total distribution is subject to the early distribution penalty?
1) $0
2) $14,000.00
3) $155,000.00 - Please note this is not the correct answer as it was marked incorrect on my quiz.
4) $169,000.00

Answer 1

Answer:

correct answer is 4) $169,000.00

Explanation:

given data

received distributions totaling =  $14,000

remaining benefits lump-sum = $155,000

solution

we know that substantial payment by as distribution method not subjected to the early distribution penalty

but lum sum amount distribution before age 59.5 is subject to 10% penalty

so here we can say till 59.5 year annuity payment not changed

so amount subject to the penalty is = $14000 + $155000

amount subject to the penalty is = $169000

so correct answer is 4) $169,000.00