In $2021,$ Kelly converted $$10,000$ from her traditional IRA to a Roth IRA. There were no nondeductible contributions made to the traditional IRA. In $2024,$ when the value of the Roth IRA had grown to $$12,450,$ Kelly, then age $62,$ withdrew the entire balance in a nonqualified distribution. What is the tax treatment of this distribution?

The distribution is not included in income and there is no penalty.

Only the $$2,450$ in earnings is included in income, but there is no penalty on the earnings distribution.

Only the $$2,450$ in earnings is included in income and there is a $10\%$ penalty on the earnings distribution.

None of the distribution is included in income, but there is a $10\%$ penalty on the entire distribution.