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

[Hoosier]

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!

[WhiteOleander]

The first time homebuyer penalty exception is only available for IRA distributions. Not distributions from 401Ks

[Hoosier]

IRA instead of 401K

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

[JohnH]

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.

[FEDUKE404]

Reducing 10% penalty for first-time homebuyer

The first time homebuyer penalty exception is only available for IRA distributions. Not distributions from 401Ks

Oh, those pesky rules!!!

( For my 2¢ 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

[TaxGuyBill]

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.

https://www.law.cornell.edu/uscode/text/26/72#t_8_D