Question

In 2018, Jessica retired at age 65. On the date of her retirement, the balance in her traditional IRA was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions and $60,000 of deductible contributions to the account. If Jessica receives a $50,000 distribution from the IRA on the date of retirement, what amount of the distribution is taxable?A) $0.

B) $5,000.
C) $37,500.
D) $45,000.
E) $50,000.

Answer 1

D

Step-by-step explanation:

In this question, we are asked to calculate the amount of the distribution that is taxable.

Mathematically, the Taxable Portion = (200,000-20,000) / 200000 = 180,000/200,000 = 90%

This means that the distribution of 10% is not taxable

Taxable amount = Taxable portion * distribution received from IRA $50000 * 90% = $ 45000