Question

Lucy takes an early distribution of $12,000 from her IRA and uses the funds to help purchase her first home. How much, if any, of the $12,000 is subject to the early withdrawal penalty

Answer 1

$2,000

Step-by-step explanation:

Data provided in the question:

Amount taken by Lucy as an early distribution from her IRA = $12,000

Now,

When the amount withdrawn is used for the first ever purchase of home the amount up to $10,000 is exempted from the penalty.

Therefore,

according to the above consideration

The amount subject to the early withdrawal penalty will be

= Amount taken - Amount exempted from the penalty

= $12,000 - $10,000

= $2,000