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Just curious,

What happens when your rmd based on the account value at the end of last year is say $10,000. The following year your investments take dive and are only valued at $8,000. You withdraw the full $8,000 and close you ira. Do you still owe tax or pay penalty for the $10,000??

I know it is a bit of a hypothetical question and would probably only happen to someone very late in retirement but I am just curious how the irs handles this situation.

TIA
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