a tax deferred account with distribution taxed at 40% and deferral allowed for a max. of 12 years, at which time a full distribution is required. and question ask for the FV of 700,000 investment at 7.5% pre tax return in this account…
the answer said: 700,000* (1+7.5%)^12 * (1-40%)
my question is why we ignore the + 40% * B part? even if we assume B = 1, we should add 40% right?
without tax credit for invested funds as at capital gains taxation. This is exactly because entire PV is taxable because contribution to TDA are on pre-tax basis and taxes are deferred and taxed in full at the moment of withdrawal.