Which statement accurately describes the required minimum distributions (RMDs) after deferring an initial RMD?

Which statement accurately describes the required minimum distributions (RMDs) after deferring an initial RMD?

• A. If she rolled the 401(k) into an IRA, Grace could elect NUA tax treatment to lower her RMDs.
• B. By deferring the first RMD to April 1, all subsequent RMDs must also be executed by April 1 each year.
• C. If Grace does not currently need the RMD income, she does not need to take it.
• D. Tom should inform Grace she must take two RMDs this year due to the deferral of the initial RMD.

Answer: (D)

The correct answer highlights an important rule regarding required minimum distributions (RMDs) after someone defers their initial RMD. When an individual reaches the age at which RMDs must begin—currently 73 as of 2023—they can choose to defer their first distribution until April 1 of the year following the year they reach this age. However, if they do this, they must take their deferred RMD along with the RMD for the following year. Thus, if Grace defers her first RMD to April 1, she will be required to take both that initial RMD and the subsequent RMD by the end of the year in which she takes the initial one. This results in her needing to take two distributions in the same tax year: one for the year she turned 73 and one for the following year. The other options do not accurately reflect the RMD requirements. For example, rolling a 401(k) into an IRA does not allow for NUA (Net Unrealized Appreciation) tax treatment and does not necessarily affect the calculation of RMDs. Moreover, choosing not to take an RMD when one does not currently need the income is not an option—the IRS mandates that RMDs be taken once

The correct answer highlights an important rule regarding required minimum distributions (RMDs) after someone defers their initial RMD. When an individual reaches the age at which RMDs must begin—currently 73 as of 2023—they can choose to defer their first distribution until April 1 of the year following the year they reach this age. However, if they do this, they must take their deferred RMD along with the RMD for the following year.

Thus, if Grace defers her first RMD to April 1, she will be required to take both that initial RMD and the subsequent RMD by the end of the year in which she takes the initial one. This results in her needing to take two distributions in the same tax year: one for the year she turned 73 and one for the following year.

The other options do not accurately reflect the RMD requirements. For example, rolling a 401(k) into an IRA does not allow for NUA (Net Unrealized Appreciation) tax treatment and does not necessarily affect the calculation of RMDs. Moreover, choosing not to take an RMD when one does not currently need the income is not an option—the IRS mandates that RMDs be taken once