Pablo and his wife Bernita are both age 45 Pablo #4066

Pablo and his wife Bernita are both age 45. Pablo works full-time, and Bernita works part-time.
Their AGI is $90,000. Neither is a participant in an employer-sponsored retirement plan. They
have been contributing to a traditional IRA for many years and have built up an IRA balance of
$120,000. They are considering rolling the traditional IRA into a Roth IRA.a. Is the couple
eligible to make the conversion? Why or why not?b. Assume that the couple does not make the
conversion but, instead, establishes a separate Roth IRA in the current year and properly
contributes $2,000 per year for four years at which point the balance in the Roth is $21,000. At
the end of four years, they withdraw $12,000 to pay for an addition to their house. What is the
tax effect, if anything, of the withdrawal?c. Does your answer to (b) change if they instead
withdraw only $6,000? Why or why not?d. What if the $12,000 withdrawal is used to pay
qualified education expenses for their daughter who is attending college?View Solution:
Pablo and his wife Bernita are both age 45 Pablo

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