George (age 42 at year-end) has been contributing to a traditional IRA for years (all deductible contributions) and his IRA is now worth $25,000. He is planning on transferring (or rolling over) the entire balance into a Roth IRA account. Georges marginal tax rate is 25 percent.

a. What are the tax consequences to George if he takes $25,000 out of the traditional IRA and puts the entire amount into a Roth IRA?

Tax Payable:___________

Penalty:_______________

Total:_________________

b. What are the tax consequences to George if he takes $25,000 out of the traditional IRA, pays the taxes due from the IRA distribution, and contributes the remaining distribution to the Roth IRA?

Tax Payable:____________

Penalty:________________

Total:__________________

c. What are the tax consequences to George if he takes $25,000 out of the traditional IRA, keeps $10,000 to pay taxes and to make a down payment on a new car, and contributes the remaining distribution to the Roth IRA?

Tax Payable:_________________

Penalty:_____________________

Total:_______________________