Louise, age 51, quit her job and received a $70,000 distribution from her employer-sponsored qualified retirement plan. She immediately contributed $50,000 to a rollover IRA and used the remaining $20,000 to purchase a car. Compute the tax cost of the distribution if Louise has a 32% marginal tax rate on ordinary income.

Question

Quizplus · Accepted Answer

$6,400 tax ($20,000 × 32%) + $2,000 premature withdrawal penalty.

Louise, Age 51, Quit Her Job and Received a $70,000