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

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.Tyson's marginal tax rate is 25%.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.He retains $12,500 to pay tax on the distribution and he contributes $37,500 to a Roth IRA.What amount of income tax and penalty must Tyson pay on this series of transactions?

A) $0 income tax;$0 penalty.
B) $12,500 income tax;$1,250 penalty.
C) $12,500 income tax;$3,000 penalty.
D) $12,500 income tax;$5,000 penalty.The distribution from the traditional IRA is fully taxable ($50,000 × 25%) .Tyson must pay a 10% penalty on the portion of the distribution that he did not contribute to a Roth IRA ($12,500 × 10%) .