Problem $10-36($LO$.6)$

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$ Federal income tax withholding$)$ on May $1,2024.$ Samuel's marginal tax rate is $24\%.$

Question Content Area

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?

Samuel includes $fill in the blank $2$efc$05$f$4$ffb$1$fda$\_1$ in his gross income, and his tax liability $($ignoring penalties$)$ on the distribution is $fill in the blank $2$efc$05$f$4$ffb$1$fda$\_2.$

Question Content Area

b$.$ What effect will the distribution have on Samuel's gross income and tax liability if he invests the $$20,000$ received in a traditional IRA within $60$ days of the distribution?

Samuel includes $fill in the blank a$9$e$44$f$01$bfdef$81\_1$ in his gross income. His related tax liability $($ignoring penalties$)$ is $fill in the blank a$9$e$44$f$01$bfdef$81\_2.$

Question Content Area

c$.$ What effect will the distribution have on Samuel's gross income and tax liability if he invests the $$20,000$ received in a Roth IRA within $60$ days of the distribution?

Samuel includes $fill in the blank e$97224$ff$0$faf$05$f$\_1$ in his gross income, and the related tax liability $($ignoring penalties$)$ is $fill in the blank e$97224$ff$0$faf$05$f$\_2.$

Question Content Area

d$.$How could Samuel have received better tax consequences when he invested the $$20,000$ received in a traditional IRA within $60$ days of the distribution? For each of the following, select "Yes" or $"$No$",$ whichever is appropriate.

a$.$If he had contributed $$25,000$ to the traditional IRA, then the amount included in his gross income would have been $$0.$

YesNo

b$.$If he had contributed half of what he received to a traditional IRA and half to a Roth IRA, the amount included in his gross income would have been $$0.$

YesNo

c$.$He could have used the direct transfer approach rather than the indirect rollover approach, and there would have been no withholding.

YesNo

d$.$If he had invested the entire amount in company stock, there would have been no withholding.

YesNo