Anthony, a 58-year-old professor, is subject to a 28% marginal tax rate

Economics Feb 10, 2021

Anthony, a 58-year-old professor, is subject to a 28% marginal tax rate. He has a family emergency and must withdraw $7100 from his traditional IRA to fund it. How much money will he owe the government for this withdrawal?

A. $710

B. $199

C. $2698

D. $1988

Expert Solution

Computation of Amount He will owe the government for this withdrawal:

Amount = (Tax rate + Penalty)* Withdrawal amount

= (28%+10%)*$7,100

= $2,698

So, Amount He will owe the government for this withdrawal is $2,698.

Note: He will have to pay 10% penalty to the Government for with before the age of 59 1/2.

So, the correct option is C "$2,698".

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