In 2014, Jessica retired at the age of 65. The current 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, what amount of the distribution is taxable?
A) $0
B) $5,000
C) $37,500
D) $45,000
E) $50,000

Question

Quizplus · Accepted Answer

The taxable portion of the distribution is calculated by subtracting the proportion of nondeductible contributions from the total distribution. The nondeductible contributions are $20,000 out of a total of $200,000, so 10% of any distribution is non-taxable. Therefore, 90% of the $50,000 distribution, or $45,000, is taxable.

In 2014, Jessica Retired at the Age of 65