Retirement Accounts
A 45-year-old who becomes permanently disabled withdraws funds from their traditional IRA. What are the tax consequences?
Disability = no 10% penalty, but still taxable income (traditional IRA).
Complete Analysis & Legal Rationale
Traditional IRA withdrawals due to disability are exempt from the 10% early withdrawal penalty. However, the distribution is still taxable as ordinary income since the contributions were made with pre-tax dollars.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
The withdrawal is still subject to ordinary income tax.
Disability is an exception to the 10% early withdrawal penalty.
Matches the verified teaching point in the explanation.
Distributions from traditional IRAs are always taxable as ordinary income.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.