What if there was enough contributions to the ROTH IRA account to "cover" the gains at the time of distribution?
Example:
Scenario 1
Total contributions: $1000
Total gains: $75
Total distribution: $800
No income tax or penalty applies regardless of age. IRS allows withdrawal up to $1000 (the total contributions in this case)
Scenario 2
Total contributions: $1000
Total gains: $75
Total distribution: $1075
Income tax on the $75 gain, and 10% penalty if less than 59.5 yrs. No income tax or 10% penalty on the $1000.
Scenario 3
Total contributions: $1000
Total loss: -$75
Total distribution: $925
No income tax or penalty applies regardless of age as the total distribution is less than the total contributed money.
Is my understanding correct?
Thank you
