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?

Question

Quizplus · Accepted Answer

The taxable portion of the distribution is calculated by determining the ratio of nondeductible contributions to the total IRA balance and applying it to the distribution. The nondeductible portion is $20,000 out of $200,000, which is 10%. Therefore, 90% of the $50,000 distribution is taxable, which is $45,000.

Jessica Retired at Age 65