Max retired in 2015 at age 62. During the year he received distributions of $9,000 from his IRA. He made nondeductible contributions of $20,000 to the IRA in prior years and has never received a nontaxable distribution. As of December 31, 2015, the value of his IRA was $150,000. Calculate the taxable portion of Max's distribution.

Question

Quizplus · Accepted Answer

The taxable portion of the distribution is calculated by determining the ratio of nondeductible contributions to the total value of the IRA, then applying that ratio to the distribution. The nondeductible contributions are $20,000, and the total value of the IRA is $150,000. The ratio is $20,000/$150,000 = 0.1333. The nontaxable portion of the $9,000 distribution is $9,000 * 0.1333 = $1,132. The taxable portion is $9,000 - $1,132 = $7,868.

Max Retired in 2015 at Age 62