Based on the following information, what is the non-taxable portion of the IRA distribution made in 1997 (rounded to the nearest dollar)?

1,500 Aggregate deductible contribution
2,000 Aggregate non-deductible contribution
3,800 Aggregate IRA account balance as of 12/31/97
1,000 IRA distribution made in 1997

Answer is 417 - help!!!

Thanks!

First of all, I want to make sure that you realize that IRAs are no longer part of the syllabus for the C-2(DC) exam. If you are planning to sit for the C-2(DC) exam in 2001, IRAs are not part of topics tested.

Assuming you are just curious as to the answer, here goes. The key to this question is that the account balance as of 12/31/97 does not include the $1,000 distribution that was taken during 1997.

$2,000 (non-deductible/ $3,800 (@12/31/97) + $1,000 (Distributed during 1997)

$2,000/$4,800=.41667 (non-taxable portion of IRA distribution)

$1,000 (1997 distribution) X .41667 = $417.00 (Recovered tax free)

Hope it helps.