What would be the difference in the tax consequences of an $18,000 withdrawal from a Roth IRA versus a traditional IRA if $15,000 represents long-term capital gains, $2,000 is short-term capital gains, and $1,000 is interest?
Assume a tax rate of 30% and a capital gains tax rate of 10%.
A) $5,200 more in taxes with a traditional IRA
B) $4,800 more in taxes with a traditional IRA
C) $5,400 more in taxes with a traditional IRA
D) $5,400 more in taxes with a Roth IRA
Answer: C
Explanation: C) Tax on Roth withdrawals = 0; tax on Traditional IRA withdrawals = $18,000 × 0.3 = $5,400, therefore, $5,400 more in taxes with a Traditional IRA.
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