Question

Jim, who is age 39, converts a $74,500 Traditional IRA to a Roth IRA in 2017. Jim's adjusted basis in the Traditional IRA is $10,000. He also makes a contribution of $5,500 to a Roth IRA in 2017 for the tax year 2017. If Jim takes a $4,000 distribution from his Roth IRA in 2018 when the account is worth $100,000, how much total federal income tax, including penalties, is due as a result of the distribution assuming his 2018 federal income tax rate is 28 percent?

Answer 1

A) $0.
B) $224.
C) $800.
D) $1,120.