Cassandra, Age 33, Has Made Deductible Contributions to Her Traditional

question 156

Essay

Cassandra, age 33, has made deductible contributions to her traditional IRA over the years. When the balance in her IRA was $40,000, Cassandra received a distribution of $34,000 from her IRA in order to purchase a new car. How much of the $34,000 distribution will she have remaining after paying income taxes and early distribution penalties on the distribution? Her marginal tax rate is 25 percent.

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Definitions:

Enthalpy

A thermodynamic quantity equivalent to the total heat content of a system, representing the amount of energy needed to create a system plus the work needed to make room for it in its environment.

Free Energy

A thermodynamic quantity that represents the amount of work that can be performed by a system at a constant temperature and pressure.

Entropy

Disorderliness; a quantitative measure of the amount of the random, disordered energy that is unavailable to do work.

Cofactor

A nonprotein substance needed by an enzyme for normal activity; some cofactors are inorganic (usually metal ions); others are organic (coenzymes).