Mr. and Mrs. Lawry, both age 60, each make the maximum contribution to their traditional IRA. Mr. Lawry is an active participant in a section 401(k) plan, but Mrs. Lawry is not an active participant in any other qualified plan. If their joint AGI before any IRA deduction is $144,900, compute their AGI.

Question

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Since Mr. Lawry is an active participant in a section 401(k) plan, his traditional IRA contribution is not deductible. On the other hand, Mrs. Lawry's contribution is deductible since she is not an active participant in any other qualified plan.

The maximum contribution for each individual for 2021 is $6,000, so the total contribution to their IRAs is $12,000. Since Mrs. Lawry's contribution is deductible, her taxable income is reduced by $6,000. However, Mr. Lawry's contribution is not deductible, so their taxable income is reduced by only $6,000 - his contribution.

The maximum contribution for those aged 50 and above is $7,000, but since Mr. and Mrs. Lawry are both age 60, they are not eligible for the catch-up contribution.

To calculate their AGI, we need to subtract their total IRA contributions of $12,000 from their joint AGI of $144,900:

$144,900 - $12,000 = $132,900

Therefore, the correct answer is C) $138,900.

Mr and Mrs