Roth Distribution with no 10% penalty?

[Sherill]

Client (age 53) receives 1099-R from local bank.
She w/draws from her Roth acct $2200 and Code J is given to her, (but she has only set up the Roth IRA w/in the last 3 years).
Why wouldn't she be subject to 10% penalty? The bank insists that she can have the full $2200 w/out penalty..
WHAT AM I MISSING HERE!
I've read13-5 and she has no exceptions.
Thank you.

[RitaB]

See 13-5, "Distributions" Column

Client (age 53) receives 1099-R from local bank.
She w/draws from her Roth acct $2200 and Code J is given to her, (but she has only set up the Roth IRA w/in the last 3 years).
Why wouldn't she be subject to 10% penalty? The bank insists that she can have the full $2200 w/out penalty..
WHAT AM I MISSING HERE!
I've read13-5 and she has no exceptions.
Thank you.

Too bad the banker can't explain why. I love bankers and brokers...

Withdrawals of contibutions (not earnings) are tax free and penalty free since the taxpayer has not deducted the contributions from income. Also, if a partial withdrawal, you considered that the first funds out are contributions, then earnings. (Sweet, huh?)

My guess is she contributed more than $2200 and actually lost money.

If that's the only ROTH she had, and a total distribution, she can take the loss (if there was one) on Schedule A, under Miscellaneous, subject to the 2% whack. It's worth a shot. See last page in 4-26.