Heather, age 67, retired in 2018. During the year she received distributions of $14,000 from her IRA. She made nondeductible contributions of $40,000 to the IRA in prior years and has never received a nontaxable distribution. As of December 31, 2018, the value of her IRA was $250,000. Calculate the taxable portion of Heather's distribution and her tax basis in the IRA after the distribution that she will carry forward to 2019.
What will be an ideal response?
The nontaxable portion of Heather's distribution is $2,121 calculated as follows:
$40,000/($250,000 + $14,000) × $14,000 = $2,121
Heather's taxable distribution is $11,879 ($14,000 - $2,121)
Her tax basis carried forward to tax year 2019 is $37,879 ($40,000 - $2,121).
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