Thomas, who is 49 years old, received a distribution from his Roth account of his employer’s 401(k) plan in the amount of $100,000 on August 11th. He has been a participant in the plan for ten years. His adjusted basis in the plan was $600,000 and the fair market value of the account as of August 11 was $1 million. The distribution was for the purpose of buying a Porsche for himself for his birthday. What is the taxable amount of the distribution and any applicable penalty? $0 taxable, $0 penalty because it is a qualified distribution. $40,000 taxable, $4,000 tax penalty. $40,000 taxable, $0 tax penalty. $100,000 taxable, $10,000 tax penalty
Thomas, who is 49 years old, received a distribution from his Roth account of his employer’s 401(k) plan in the amount of $100,000 on August 11th. He has been a participant in the plan for ten years. His adjusted basis in the plan was $600,000 and the fair market value of the account as of August 11 was $1 million. The distribution was for the purpose of buying a Porsche for himself for his birthday. What is the taxable amount of the distribution and any applicable penalty? $0 taxable, $0 penalty because it is a qualified distribution. $40,000 taxable, $4,000 tax penalty. $40,000 taxable, $0 tax penalty. $100,000 taxable, $10,000 tax penalty
Chapter6: Accounting Periods And Other Taxes
Section: Chapter Questions
Problem 12P: Otto and Monica are married taxpayers who file a joint tax return. For the current tax year, they...
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Thomas, who is 49 years old, received a distribution from his Roth account of his employer’s 401(k) plan in the amount of $100,000 on August 11th. He has been a participant in the plan for ten years. His adjusted basis in the plan was $600,000 and the fair market value of the account as of August 11 was $1 million. The distribution was for the purpose of buying a Porsche for himself for his birthday. What is the taxable amount of the distribution and any applicable penalty?
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$0 taxable, $0 penalty because it is a qualified distribution. |
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$40,000 taxable, $4,000 tax penalty. |
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$40,000 taxable, $0 tax penalty. $100,000 taxable, $10,000 tax penalty |
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