First time home buyers

[BOB W]

I thought I knew the answer but a client was told differently..............

I thought that ONLY IRA distribution were eligible for first time home buyer and the first 10,000 of distributions can be excluded from the 10% penalty. My client is a carpenter and he was able to take 49,000 out of his carpenter's union annuity . The union told him there would be NO penalty, just taxes.

Here we go again>>EVERYBODY IS A TAX EXPERT..........

Am I correct that a NON IRA is not eligible for the exclusion????

[Jesse]

Bob you are correct. If it is not an IRA my guess is it is a loan and he forgot to tell you the part that he is paying himself back or he will be receiving a 1099R in with code 1 and no IRA box checked, therefore, no exceptions to the penalty.

Unless they somehow rolled it over into an IRA and then took the w/drawal, but even if that be the case he can only exclude $10,000 from the penalty.

[BOB W]

Bob you are correct. If it is not an IRA my guess is it is a loan and he forgot to tell you the part that he is paying himself back or he will be receiving a 1099R in with code 1 and no IRA box checked, therefore, no exceptions to the penalty.

Unless they somehow rolled it over into an IRA and then took the w/drawal, but even if that be the case he can only exclude $10,000 from the penalty.

Jesse> The 1099R was code 1, IRA box not checked....

Thanks for the feed back........

[Burke]

Often the taxpayer hears the words "no penalty" and thinks IRS tax penalty, when what they meant was no withdrawal penalty from the annuity itself. On most annuities, you have to keep them 7-15 years to avoid contractual surrender penalties on withdrawal of funds.

[BOB W]

Often the taxpayer hears the words "no penalty" and thinks IRS tax penalty, when what they meant was no withdrawal penalty from the annuity itself. On most annuities, you have to keep them 7-15 years to avoid contractual surrender penalties on withdrawal of funds.

Burke, you are probably right.... Thanks