Heidi invested $4,000 in her Roth 401(k) on January 1, 2007. This was her only contribution to the...

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Heidi invested $4,000 in her Roth 401(k) on January 1, 2007. This was her only contribution to the account. On July 1, 2015, when the account balance was $6,000, she received a nonqualified distribution of $4,500. What is the taxable portion of the distribution and what amount of early distribution penalty will Heidi be required to pay on the distribution?

Robert · Accepted Answer

First of all, we have to calculate non taxable amount to get taxable amount. 
Heidi’s non deductible part to the tax : 
 Heidi’s contribution / Heidi’s account balance 
=$4,000 / $6,000 
=66.67% 
Heidi received nonqualified distribution amount is  $4,500,

Heidi invested $4,000 in her Roth 401(k) on January 1, 2007. This was her only contribution to the account. On July 1, 2015, when the account balance was $6,000, she received a nonqualified...

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