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What amount of income tax and penalty must tyson pay

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Question - Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. The balance consists of $30,000 of deductible contributions and $20,000 of account earnings. Tyson's marginal tax rate is 25%. Tyson receives a distribution of the entire $50,000 balance of his traditional IRA. He immediately contributes $37,500 to a Roth IRA. What amount of income tax and penalty must Tyson pay on this series of transactions?

A. $0 income tax; $0 penalty.

B. $12,500 income tax; $1,250 penalty.

C. $12,500 income tax; $3,000 penalty.

D. $12,500 income tax; $5,000 penalty.

Reference no: EM132190813

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