Financial Industry Regulatory Authority (FINRA) Practice Exam 2025 - Free FINRA Practice Questions and Study Guide

When a 72-year-old individual withdraws only part of their required minimum distribution (RMD) from an IRA, they may be subject to both income tax on the amount that is withdrawn and a penalty for the portion of the required distribution that was not taken.

The IRS mandates that individuals must take RMDs starting at age 72, which are calculated based on life expectancy and account balance. If the individual fails to withdraw the total RMD amount, the shortfall is subject to a hefty penalty—specifically, 50% of the amount not withdrawn. This results in a substantial consequence since the goal of the RMD is to ensure the individual is receiving the required distributions from their tax-deferred accounts during their retirement years.

While income tax will apply to the amount withdrawn, the significant aspect that highlights both taxes and penalties is the missed distribution. Hence, if the individual fails to take the full RMD, they are indeed liable for taxes on what they did withdraw along with penalties for the missed required distribution. Therefore, the correct answer reflects the total obligations owed in this scenario, combining both tax liabilities and penalties incurred due to non-compliance with RMD rules.