Question

Arthur, age 50, made total Roth IRA contributions of $50,000 and had never previously taken a distribution. If he took a nonqualified Roth IRA distribution of $60,000, requiring him to recognize $10,000 of income, what tax penalty will be imposed if no exception to the penalty applies?.

Answer 1

Based on the information given, it should be noted that the tax penalty that will be imposed will be $600.

From the information given, Arthur made total Roth IRA contributions of $50,000 and he took a nonqualified Roth IRA distribution of $60,000, requiring him to recognize $10,000 of income.

It should be noted that he has taken an excess of $10000 and the penalty is equal to 6% of the amount taken. This will be:

= 6% × $10000

= $600

In conclusion, the correct option is $600.

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