A 50 1/2 year old self-employed individual has a balance of $200,000 in his HR 10 plan. This balance is composed of $140,000 of contributions and $60,000 of earnings. The individual decides to withdraw $100,000 from the plan. Which statements are TRUE?

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A 50 1/2 year old self-employed individual has a balance of $200,000 in his HR 10 plan. This balance is composed of $140,000 of contributions and $60,000 of earnings. The individual decides to withdraw $100,000 from the plan. Which statements are TRUE?

I The entire withdrawal is taxed as ordinary income

II Since half the account balance has been withdrawn, the withdrawal is taxed at 50% of ordinary rates

III The entire withdrawal is subject to a 10% penalty tax

IV Since half of the account has been withdrawn, the withdrawal is subject to half of the 10% penalty tax

A. I and III

B. I and IV

C. II and III

D. II and IV

Answer: A.

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