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Scenario $3$: Qualified Higher Education Expenses

David retired at age $52$ and took a $$40,000$ distribution from his Traditional IRA. He used $$25,000$ to pay for his daughter's eligible college expenses.

Wages: $$20,000$

Interest and Dividend Income: $$1,500$

Itemized Deductions: $$14,000$

Allowable deduction for self$-$employment tax: None

Calculate:

The portion of the distribution subject to the $10\%$ early withdrawal penalty.

AGI, Taxable Income, and Total Tax Liability.