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Correct Factor for IRA Distribution
by Randy Carey, BOL Guru
Guru Bio
Question: A customer turned 70 1/2 on 11/6/06 and waited until 2007 to take their first distribution. Do I take the balance in the IRA as of 12/1/05 and divide by 26.5 (factor for 2007) or should it be 27.4 (factor for 70 in 2006)? To satisfy their 2007, the balance would be as of 12/21/06 divided by 26.5 (2007 factor). Please let me know what correct factor is and if I'm using the correct amount.
Answer: From IRS Publication 590:
Laura was born on October 1, 1935. She is an unmarried participant in a qualified defined contribution plan. She reaches age 70½ in 2006. Her required beginning date is April 1, 2007. As of December 31, 2005, her account balance was $26,500. No rollover or recharacterization amounts were outstanding. Using Table III in Appendix C, the applicable distribution period for someone her age (71) is 26.5 years. Her required minimum distribution for 2006 is $1,000 ($26,500 ÷ 26.5). That amount is distributed to her on April 1, 2007. IRS Pub 590 can be found here.
First published on BankersOnline.com 2/19/07
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