Mr. Scott, age 46, quit his job with MNP Inc. and withdrew the $184,000 balance in his Section 401(k) plan. Mr. Scott immediately deposited the withdrawal in a new rollover Roth IRA with a local bank. Which of the following statements is false?

Question

Quizplus · Accepted Answer

- A is false because Mr. Scott will have to include the $184,000 withdrawal in gross income, which will be taxable.
- B is false because Roth IRAs do not have required minimum distributions (RMDs) like traditional IRAs. Mr. Scott can continue to let the funds grow tax-free in his Roth IRA without having to take distributions by any age.
- C is true. Qualified withdrawals from Roth IRAs, after reaching age 59 1/2 and satisfying a five-year holding period, are nontaxable.
- D is false because statement B is incorrect.

Answer: A

If Vernon hires an employee for $72,000 in annual salary, the after-tax cost will be: 
$72,000 x (1 - 0.21) = $56,880.

If Vernon engages an independent contractor for a $75,000 annual fee, the after-tax cost will be:
$75,000 - ($75,000 x 0.21) = $59,250.

Therefore, hiring an employee results in a lower after-tax cost and is the better option.

Mr Scott, Age 46, Quit His Job with MNP Inc