Question: In 2 0 2 0 , Felicia started a Roth IRA with a $ 1 0 , 0 0 0 contribution. In 2 0 2

In 2020, Felicia started a Roth IRA with a $10,000 contribution. In 2023, Felicia, then age 47, took a $2,500 distribution from the Roth IRA. The value of the Roth IRA at the time was $11,000.
What is the tax treatment of this distribution?
None of the distribution is included in income, BUT there is a 10% tax penalty on the entire distribution.
The distribution is NOT included in income and there is NO penalty.
Only the $1,000 in earnings is included in income, AND there is a 10% penalty on the earnings distribution.
Only the $1,000 in earnings is included in income, but there is NO penalty on the earnings distribution.

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