Question

In 2019, Rashaun (62 years old) retired and planned on immediately receiving distributions (making withdrawals) from...

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Non- taxable contribution of the amount withdrawn = Amount of withdrawl * Rate of non taxable contribution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