Question: Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his

Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his § 401(k) account of $20,000 ($25,000 - $5,000 withholding) on May 1, 2016. Samuel's marginal tax rate is 28%.
a. What effect will the distribution have on Samuel's gross income and tax liability if he invests the $20,000 received in a mutual fund?
b. Same as (a) except that Samuel invests the $20,000 received in a traditional IRA within 60 days of the distribution.
c. Same as (a) except that Samuel invests the $20,000 received in a Roth IRA within 60 days of the distribution.
d. How could Samuel have received better tax consequences in (b)?

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a Samuel is treated as having received a 25000 distribution ie the 20000 received and the 5000 withh... View full answer

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