Wally (Married Filing Jointly) has a Traditional IRA with a balance of $150,000. Some of the contributions to the IRA over the years have been non-deductible, resulting in Wally accruing a certain amount of basis in his account. Wally has correctly filed his form 8606 each year with the IRS. Wally is 40 years old and wishes to make an early withdrawal of $10,000 from the account. The withdrawal is not qualified for an exemption from early withdrawal penalties. According to the IRS, Wally can claim a basis of 20% of the amount of the withdrawal. Wally is in the 22% marginal tax bracket. After taxes and penalties, how much of the $10,000 early withdrawal will Wally actually receive?
Wally (Married Filing Jointly) has a Traditional IRA with a balance of $150,000. Some of the contributions to the IRA over the years have been non-deductible, resulting in Wally accruing a certain amount of basis in his account. Wally has correctly filed his form 8606 each year with the IRS. Wally is 40 years old and wishes to make an early withdrawal of $10,000 from the account. The withdrawal is not qualified for an exemption from early withdrawal penalties. According to the IRS, Wally can claim a basis of 20% of the amount of the withdrawal. Wally is in the 22% marginal tax bracket. After taxes and penalties, how much of the $10,000 early withdrawal will Wally actually receive?
Group of answer choices
$7,440
$5,440
$8,000
$10,000
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