distribution code 2 1099-R

[arlo]

Client age 56 cashed in his retirement account of $112,000 to start a business. I Thought that I would see a 10% penalty for this on his return. but there is none. Code 2 says exceptions apply. But I do not know the exception. I looked a TB page 13-3 for help on form 5329. Could someone help answer why no penalty? I want to make sure he does not owe the penalty.

[Burke]

Perhaps termination from employer and distribution after age 55 from a 401k ?

[arlo]

distribution code 2 1099-R

Thanks Burke, That must be it. Learn something new each day. I always thought that any distribution before 59 1/2 was cause for a penalty.