Question

Taxpayers are allowed to rollover funds from a deductible traditional IRA to a Roth IRA without paying a penalty if the rollover is completed within (1) days from the withdrawal from the traditional IRA. The amount of the rollover is (2)% taxable as (3) income.

a) 60; 50; Ordinary
b) 90; 100; Capital Gains
c) 30; 75; Tax-Free
d) 120; 25; Dividends

Answer 1

Taxpayers rolling over funds from a traditional IRA to a Roth IRA must complete the process within 60 days to avoid penalties, and the rolled over amount is 100% taxable as ordinary income.

Step-by-step explanation:

When a taxpayer rolls over funds from a deductible traditional IRA to a Roth IRA, the process must be completed within a certain timeframe to avoid a penalty. The correct answer is (a) 60; 100; Ordinary. This means that the rollover must be completed within 60 days from the withdrawal from the traditional IRA. The amount of the rollover is 100% taxable as ordinary income. In other words, the entire converted amount is included in the taxpayer's income for that year, and it is taxed at their ordinary income tax rate, not as capital gains or dividends.