What is a qualified ROTH Distribution that would prevent the imposition of the 10% penalty?
Per the IRS, “a qualified distribution" is a distribution that is made after a five-taxable-year (See below) period and at least one of the following:
1. Made on or after the date the owner attains age 59½.
2. Made to a beneficiary or the estate of the owner on or after the date of the owner’s death.
3. Attributable to the owner’s being disabled.
4. Used under the first-time home purchase provision.
Note: That the five-year taxable period for qualified distributions begins on the first day of the tax year for which the first regular contribution is made to any Roth IRA, or, if earlier, the first day of the year of the first conversion contribution; and ends on the last day of the individual’s fifth consecutive tax year.
Distributions to a beneficiary that are not qualified distributions will be includable in the beneficiary’s gross income.
Any Nonqualified distributions that exceed the owner’s contributions to all of his/her Roth IRAs are taxable. The 10% penalty tax under IRC Sec. 72(t) will apply (unless an exception is met) to any distribution from a Roth IRA that is includable in gross income.