Question

In 2019, Rashaun (62 years old) retired and planned on
immediately receiving distributions (making withdrawals) from his
traditional IRA account. The balance of his IRA account is $160,000
(before reducing it for withdrawals/distributions described below).
Over the years, Rashaun has contributed $40,000 to the IRA. Of his
$40,000 contributions, $30,000 was *nondeductible* and
$10,000 was *deductible*. Assume Rashaun did not make any
contributions to the account during 2019. **(Do not round
intermediate calculations. Round your final answers to the nearest
whole dollar amount.)**

**a.** If Rashaun currently withdraws $20,000 from
the IRA, how much tax will he be required to pay on the withdrawal
if his marginal tax rate is 24 percent?

Amount of withdrawal | ____________ | ||

Ratio of nondeductible contributions | |||

deductible or nondeductible contributions or Total IRA contributions or account balance | ____________ | ||

deductible or nondeductible contributions or Total IRA contributions or account balance | _____________ | % | |

Non-taxable | |||

Taxable | _________ | ||

Tax rate | _________ | % | |

Tax | _________ | ||

Answer #1

Rate of non taxable contributions = $30000/$160000 = 18.75%

Non- taxable contribution of the amount withdrawn = Amount of withdrawl * Rate of non taxable contribution

=$20000* 18.75% = $3750

Taxable Contribution =$20000-$3750 = $16250

**Tax payable on
withdrawl if marginal tax rate is 24%**

Particulars |
Value |

Amount of withdrawl | $20000 |

Ratio of non deductible contributions | |

Non deductible Contribution | $30000 |

Non taxable Contribution | $3750 |

Taxable Contribution | $16250 |

Tax rate | 24% |

Tax | $3900 |

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