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Parker, age 48, has a traditional Ira with a balance of $50,000. The $50,000 balance consists...

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Accounting

Parker, age 48, has a traditional Ira with a balance of $50,000.The $50,000 balance consists of $30,000 of contributions andearning of $20,000. This year Parker's marginal tax rate is 24%.Parker is convinced that his marginal tax rate will increase in thefuture. Parker decides to cash out his IRA and received $50,000this year. He contributes $40,000 of these $50,000 to a Roth IRA.How much income tax and penalty must Parker pay this year?


-Income tax __

-Penalty __

Answer & Explanation Solved by verified expert
4.4 Ratings (852 Votes)
Assumption Traditional IRA is deductible IRA that means contribution to IRA is deductible and entire distribution that is contribution and earning is taxable at marginal tax rate As per publication 590 of IRS Code Income Tax Traditional IRA both contribution ie    See Answer
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