Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. The balance consists of $30,000 of deductible contributions and $20,000 of account earnings. Convinced that his marginal tax rate will increase in the future, Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA. Assuming his marginal tax rate is 25%, what amount of penalty, if any, must Tyson pay on the distribution from the traditional IRA?

Question

Quizplus · Accepted Answer

The distribution from the traditional IRA is fully taxable but is not subject to penalty because Tyson contributed the full $50,000 to a Roth IRA within 60 days from the time of withdrawal.

Tyson (48 Years Old) Owns a Traditional IRA with a Current