(a) General rule. A tax equal to 50 percent of the amount by which the minimum amount required to be distributed from an individual retirement account or annuity described in section 408 during the taxable year of the payee under paragraph (b) of this section exceeds the amount actually distributed during the taxable year is imposed by section 4974 on the payee.
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Terms Used In 26 CFR 54.4974-1
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
(b) Minimum amount required to be distributed. For purposes of this section, the minimum amount required to be distributed is the amount required under § 1.408-2(b)(6)(v) to be distributed in the taxable year described in paragraph (a) of this section.
(c) Examples. The application of this section may be illustrated by the following examples.
Example 1.In 1975, the minimum amount required to be distributed under § 1.408-2(b)(6)(v) to A under his individual retirement account is $100. Only $60 is actually distributed to A in 1975. Under section 4974, A would have an excise tax liability of $20 [50% of ($100?$60)].Example 2.Although no distribution is required under § 1.408-2(b)(6)(v) to be made in 1986, H, a married individual born on February 1, 1921, who has established and maintained an individual retirement account decides to begin receiving distributions from the account beginning in 1986. H’s wife, W, was born on March 6, 1921. H and W are calendar year taxpayers. H decides to receive his interest in the account over the joint life and last survivor expectancy of himself and his wife. On January 1, 1986, the balance in H’s account is $10,000; H and W, based on their nearest birthdates, are 65; and the joint life and last survivor expectancy of H and his wife is 22.0 years (see Table II of § 1.72-9). His annual payments during the following years (none of which were required) were determined by dividing the balance in the account on the first day of each year by the joint life and last survivor expectancy reduced by the number of whole years elapsed since the distributions were to commence.| Date | Life expectancy minus whole years elapsed | Account balance at beginning of each year | Annual payment |
|---|
| Jan. 1, 1986 | 22.0 | $10,000 | $455 |
| Jan. 1, 1987 | 21.0 | 10,118 | 482 |
| Jan. 1, 1988 | 20.0 | 10,214 | 511 |
| Jan. 1, 1989 | 19.0 | 10,285 | 541 |
| Jan. 1, 1990 | 18.0 | 10,329 | 574 |
| Jan. 1, 1991 | 17.0 | 10,340 | 608 |
