Lisa, age 45, needed some cash so she withdrew $50,000 from her Roth IRA (not a coronavirus-related distribution). At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA eight years ago. Through aconversion and annual contributions, she has contributed $80,000 to her account. What amount of the distribution is taxable and subject to early distribution penalty?
A)$0.
B)$20,000.
C)$30,000.
D)$50,000.

Question

Quizplus · Accepted Answer

Withdrawals from a Roth IRA are tax-free and penalty-free provided they are taken after the account has been open for at least five years and the owner is at least 59½ years old. Since Lisa's Roth IRA was established more than five years ago, her withdrawals up to her contribution amount ($80,000) are not taxable or penalized, regardless of her age. Since she withdrew $50,000, which is less than her total contributions, the entire amount is tax-free and not subject to an early distribution penalty.

Lisa, Age 45, Needed Some Cash So She Withdrew $50,000