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Cooper can invest $10,000 after-tax dollars in a taxable bond either outside or inside a traditional nondeductible IRA. He will hold the investment for ten years. The bond yields 6% before taxes and Cooper's marginal tax rate is 33%. If he invests directly in the bond, he will withdraw an amount of interest each year sufficient to pay taxes and leave the remaining interest in the investment. What are the after-tax accumulations in the bond and in the IRA? Cooper will not be subject to the 10% penalty tax when the IRA withdrawal occurs.
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We do not judge the people we love.

Prentice Hall's Federal Taxation by Kramer
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The after-tax accumulation for the direct investment in the bond uses the Current Model.
10,000 [(1 + .06)(1 - 0.33)]10 = $14,802

The after-tax accumulation for the nondeductible traditional IRA uses the Deferred Model.
10,000 [(1.06) (1 - 0.33) + 0.33]10 = $15,298
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