Jamie is 42 years old and received a $20,000 distribution from his Roth IRA, established in 2009. At the time of the distribution, the Roth IRA account totaled $33,748: $18,000 regular contributions, $10,000 taxable conversion contributions made in 2014, and $5,748 earnings. How much of his distribution is taxable and subject to this early distribution penalty?

1) $0 taxable; $0 penalized.

2) $0 taxable; $2,000 penalized.

3) $0 taxable; $20,000 penalized.

$2,000 taxable; $2,000 penalized. (This is not the correct answer. It was marked incorrect on my quiz).