Jessica retired at age 65. On the date of her retirement, the 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 on the date of retirement, what amount of the distribution is taxable?

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Rodolfo Walter

6 October, 05:54

Jessica retired at age 65. On the date of her retirement, the 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 on the date of retirement, what amount of the distribution is taxable?

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Tristan Hammond · Answer 1

The taxable amount of the distribution is $45,000.

Explanation:

The balance in Jessica's account is $200,000.

The non-deductible contributions made is $20,000.

The deductible contributions made is $60,000.

The amount of distribution received is $50,000.

Non taxable amount percentage

= (non deductible contributions/balance in account) * 100

= ($20,000/$200,000) * 100

=10%

Taxable amount will thus be 100-10=90% of the distribution

=$50,000 * (90/100)

=$45,000.