Ryan, Age 48, Received an $8,000 Distribution from His Traditional

question 113

Essay

Ryan, age 48, received an $8,000 distribution from his traditional IRA to pay for medical expenses (above the 7.5% of AGI floor). Ryan has made only deductible contributions to the IRA and his marginal tax rate is 28 percent. What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

---

Definitions:

Bankruptcy Judge

A judicial officer with the authority to preside over bankruptcy cases.

Chapter 11

A provision within the U.S. Bankruptcy Code that allows for the reorganization of a debtor's business affairs and assets.

Priority Debtors

Creditors that are given precedence over other creditors for repayment in the event of a debtor's bankruptcy or liquidation.

Repayment Plan

A strategy agreed upon between a creditor and a debtor to pay back an outstanding debt within a specified timeline.