Jamie is 42 years old and received a 20000 distribution from

Jamie is 42 years old and received a $20,000 distribution from his Roth IRA, established in 2009. At the time of the distribution the Roth IRA account totaled $33,748: $18,000 regular contributions, $10,000 taxable conversion contributions made in 2014, and $5,748 earnings. How much of his distribution is taxable and subject to the early distribution penalty:

Solution

The $10,000 representing taxable conversion assets will be tax-free because the taxes were paid when the assets were converted. There will be no penalty too, as it has been more than five years since the conversion occurred.

Earnings of $5,784 will be taxable.