Problem 13-73 (LO 13-4) Sherry, who is 52 years of age, opened a Roth IRA three

Question

Problem 13-73 (LO 13-4) Sherry, who is 52 years of age, opened a Roth IRA three years ago. She has contributed a total of $13,500 to the Roth IRA ($4,500 a year). The current value of the Roth IRA is $20,550. In the current year, Sherry withdraws $18,200 of the account balance to purchase a car. Assuming Sherry is in a 25 percent marginal tax bracket, how much of the $18,200 withdrawal will she retain after taxes to fund her car purchase? Amount of withdrawal Non-taxable amount Amount subject to tax Tax rate Penalty rate Tax Penalty After tax withdrawal retained

Explanation / Answer

Amount of withdrawl $18,200.00 Non-Taxable Amount $13,500.00 Amount subject to tax $4,700.00 Tax Rate 25.00% Penalty rate 10.00% Tax ($4700 x 25%) $1,175.00 Penalty ($4700 x 10%) $470.00 After tax withdrawl retained ($18,200 - $1175 -$470) $16,555.00

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