Lisa, age 45, needed some cash so she withdrew $50,000 from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA 10 years ago. Over the years, she has contributed $20,000 to her account. What amount of the distribution is taxable and subject to early distribution penalty?
A) $0.
B) $5,000.
C) $30,000.
D) $50,000.

Question

Quizplus · Accepted Answer

Because this is a nonqualified distribution, Lisa is taxed and penalized (because she was not 59½ years of age at the time of the distribution) to the extent the distribution exceeds her contributions to the account. In this case, the excess is $30,000 ($50,000 distribution minus $20,000 contributions).

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