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Form 5329 - Exception 9 - Is mobile home a principal residence?

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    Form 5329 - Exception 9 - Is mobile home a principal residence?

    MFJ taxpayer has a $30,000 1099-R from his 401k with a Code 1 for early distribution. Taxpayer wants to utilize Form 5329 Exception #9 for first time homebuyer since the funds were used to build a modular home. The modular was built on the same site as the mobile home that he and his spouse have lived in over the last three years. The question is: Does the mobile home qualify as a principal residence and therefore prohibit the taxpayer from using this Exception? If the taxpayer is able to use the Exception it would appear that the Exception would be a total of $20,000 ($10,000 for each taxpayer). Any thoughts on this? Thanks!

    #2
    The first time homebuyer penalty exception is only available for IRA distributions. Not distributions from 401Ks
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

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      #3
      IRA instead of 401K

      Let me re-ask the question with the early withdrawal being from an IRA instead of a 401k. Thanks.

      Comment


        #4
        I think he's out of luck, but that's based only on opinion rather than any research.
        If the TP owned the mobile home, it's a residence.
        And the 401(k) vs IRA issue must be settled or the entire conversation is moot.
        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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          #5
          Reducing 10% penalty for first-time homebuyer

          Originally posted by WhiteOleander View Post
          The first time homebuyer penalty exception is only available for IRA distributions. Not distributions from 401Ks
          Oh, those pesky rules!!!

          ( For my 2ΒΆ worth, I think the cited owner of the IRA with the funds withdrawal likely already had a "home." )

          And the Form 5329 just negates a portion of the 10% penalty, not the underlying income tax on the distribution.

          I would have to read the fine print on the rules, but I don't think the owner of any IRA can "double deduct" merely because of filing a joint return. That would leave only a $10k exclusion from the penalty instead of a $20k exclusion from the penalty. (Unless the spouse ALSO had a similar withdrawal from the spouse's **own** retirement account.)

          It's too hot for me to pursue this any further. . .

          FE

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            #6
            Originally posted by FEDUKE404 View Post
            That would leave only a $10k exclusion from the penalty instead of a $20k exclusion from the penalty.
            Good catch. I agree.


            However, the amount won't matter because it was from a 401k. It also won't matter because he already had an "ownership interest in a principal residence", which disqualifies him from the penalty exception.

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