What are Jessica's tax consequences of converting her traditional IRA to a Roth IRA?

When converting a traditional IRA to a Roth IRA, the individual must pay taxes on the amount converted because traditional IRAs are funded with pre-tax dollars, whereas Roth IRAs are funded with after-tax dollars. This means that any amount that is converted from a traditional IRA is considered taxable income for the year of conversion.

In this scenario, since Jessica is converting a traditional IRA valued at $300,000 to a Roth IRA, she will need to include the entire amount in her taxable income for that tax year. This results in a tax liability based on her ordinary income tax rate. The conversion does not qualify for any tax-free treatment, and as such, she cannot avoid these taxes or pay them only on gains. The full amount converted is subject to income tax, explaining why this option is the appropriate answer.

Other choices either indicate incorrect tax treatments or misunderstand the implications of the conversion process, such as suggesting there is no tax liability or that taxes are only owed on gains, which does not apply in this conversion context.