Question

Caden is 62 years old and has a traditional IRA with a balance of $220,000. Of that amount, $66,000 is from nondeductible contributions made while Caden was working. Earnings on the nondeductible contributions equal $20,600. If Caden withdraws $15,000 from his IRA this year, $_____ will NOT be subject to taxation.

Answer 1

Answer:

$4500.

Explanation:

So, we are given the following data or parameters or information in the question above;

=>" traditional IRA with a balance => $220,000."

=> "Of that amount, $66,000 is from nondeductible contributions made while Caden was working. "

=> "Earnings on the nondeductible contributions equal $20,600. "

=> "If Caden withdraws $15,000 from his IRA this year"

Hence;

The amount that will NOT be subject to taxation = (Amount from nondeductible contributions made while Caden was working) ÷ (traditional IRA with a balance) × (withdrawal from his IRA this year).

=> [66000/ 220000] × 15,000 = $4500.

NB: IRA stands for Individual retirement account and it is used in the United States of America to allow workers to save for their retirement and making sure that they are tax-free.