Bryan, who is 45 years old, had some surprise medical expenses during the year.To pay for these expenses (which were claimed as itemized deductions on his tax return), he received a $20,000 distribution from his traditional IRA (he has only made deductible contributions to the IRA).Assuming his marginal ordinary income tax rate is 15 percent, what amount of taxes and/or early distribution penalties will Bryan be required to pay on this distribution?

Question

Quizplus · Accepted Answer

The distribution is fully taxable as ordinary income, so Bryan will owe $3,000 in income tax (20,000 x 15%). However, because he is over age 59½, he will not owe any early distribution penalty.

Bryan, Who Is 45 Years Old, Had Some Surprise Medical