What is the exception to the 10% penalty tax for Jacqueline taking an early distribution from her IRA?

The correct answer is grounded in the specific provisions of the Internal Revenue Code regarding early distributions from Individual Retirement Accounts (IRAs). When an individual takes an early distribution from their IRA before reaching the age of 59½, there is generally a 10% penalty tax imposed. However, there are certain exceptions to this penalty, one of which pertains to distributions made to family members under specific circumstances.

In this case, if Jacqueline takes an early distribution from her IRA for her spouse, child, or grandchild, she may qualify for an exception to the 10% penalty. The law recognizes these family members as being eligible for penalty-free distributions under certain conditions, which primarily relate to the financial support or medical needs of these individuals.

This specific provision is designed to alleviate financial burdens in critical situations, such as medical emergencies or significant life events affecting her dependent family members. In contrast, the other options do not precisely capture the requirements detailed in tax legislation and thus do not meet the criteria for penalty exceptions regarding early IRA distributions.