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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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 |
||
|
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education