Lisa, age 45, needed some cash so she withdrew $50,000 from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA 8 years ago. Through a rollover and annual contributions, she has contributed $80,000 to her account. What amount of the distribution is taxable and subject to early distribution penalty?
A) $0.
B) $20,000.
C) $30,000.
D) $50,000.

Question

Quizplus · Accepted Answer

While this is a nonqualified distribution, the distribution is deemed to first come from account contributions. Because the distribution amount is less than the contributions, the distribution is not taxable. That is, account earnings were distributed.

Lisa, Age 45, Needed Some Cash So She Withdrew $50,000