CIP Planning Practice Test & Exam Prep

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A 50-year-old taxpayer with $200,000 in modified AGI converts $80,000 from a traditional IRA to a Roth IRA in 2026. Which statement is correct regarding the Roth conversion?

The conversion is tax-free because the taxpayer is over age 50 The $80,000 is included in 2026 ordinary income; no 10% early-withdrawal penalty applies to the conversion itself Only the earnings portion of $80,000 is taxable; basis is recovered first The conversion is barred because MAGI exceeds the Roth contribution phase-out

Correct Answer:

The $80,000 is included in 2026 ordinary income; no 10% early-withdrawal penalty applies to the conversion itself

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