Ira

[qzp9gp]

Client retired last year rollover 401K to IRA. Took money out of IRA to purchased home. 1st time homebuyer. 1099R is coded 1. Client says her financial adviser says they always code 1099R using code 1 and that an exception form should be filled out to get the 10% penalty waived. The distribution is for 60,000. I thought that the 1099R had to be coded with the exception code. How would this be handed to get the 10% penalty waived on the $10,000?

Thanks

[Brian EA]

Client retired last year rollover 401K to IRA. Took money out of IRA to purchased home. 1st time homebuyer. 1099R is coded 1. Client says her financial adviser says they always code 1099R using code 1 and that an exception form should be filled out to get the 10% penalty waived. The distribution is for 60,000. I thought that the 1099R had to be coded with the exception code. How would this be handed to get the 10% penalty waived on the $10,000?

Thanks

File form 5329 and take the exception

[stern100]

FYI- most brokerage houses are coding them 1 on early distributions and letting the client sort it out by filing the 5329. They started doing this last year. I think they don't want to be implicated in any possible tax fraud.

[qzp9gp]

Ira

Thanks, for your help. I can kind of see their point about not wanting to be implicated in tax fraud. I would have had second thoughts too but client had closing papers where she purchased the home. Thanks again

[jainen]

>>I thought that the 1099R had to be coded with the exception code.<<

How is the bank supposed to know what you spend the money on?