Which of the following statements is (are) true regarding the Roth IRA? I.Roth IRA contributions are tax deductible. II.Roth IRA investment income accumulates income-tax free.
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28. Randy (age 42) wants to open an IRA for retirement and tax advantages. Randy meets the eligibility requirements necessary to make an IRA contribution. Which of the following statements concerning Randy's IRA contributions is accurate? a) Randy must make a traditional IRA contribution. b) Randy must make a Roth IRA contribution. c) If Randy chooses to make a contribution to a traditional IRA, his contribution will be nondeductible due to his age. d) Randy can make a contribution to a traditional or Roth IRA; however, his contribution could be limited.
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Todd, age 60, has made contributions of $75,000 to his traditional IRA, of which $15,000 were nondeductible contributions. He is considering taking a $20,000 distribution from his IRA, which currently has a fair market value of $175,000. When calculating the nontaxable portion of his IRA, which of the following formulas is CORRECT? Nontaxable portion = nondeductible contributions Ă· [(IRA balance at the beginning of the year + the IRA balance at the end of the year) Ă· 2] Ă— IRA distributions Nontaxable portion = nondeductible contributions Ă· (IRA balance at the beginning of the year + any distributions taken during the year) Ă— IRA distributions Nontaxable portion = [(nondeductible contributions prior to current year + all contributions for current year) Ă· (balances at end of current year + distributions received in current year)] Ă— total distributions during current year A) I only B) II only C) III only D) None of these
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