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December 2023 client takes a distribution and receives a 1099-R
Box 1 Gross Distribution $264,076
Box 2 Taxable Distribution $264,076
Box 2b Taxable amounts not determined checked
Box 7 Distribution Code 4 Death
IRA/SEP/Simple marked with X
Client used funds to purchase a home in 2023 with these funds.
Question: Can the client take a $10,000 first time homeowner's credit resulting in taxable income being reduced? If yes, where do you enter in Lacerte?
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It's not a credit.
It doesn't reduce taxable income.
It is only an exception to the 10% premature distribution penalty.
The more I know the more I don’t know.
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Thanks for confirming what I found and have been applying for many years. I got a client who insist that I'm wrong.
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@Brad Farmer if your client is insisting that you are wrong, then what are you waiting for? Tell him to do the return himself.
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"who insist that I'm wrong"
Wrong about which part?
"Dear client: if you were subject to an early withdrawal penalty, the first time homebuyer exception is one qualification for the waiver of the 10% penalty, for up to $10,000 of the distribution. Since you have an inherited IRA and are required to take distributions from it, there is no penalty at all. Therefore, the exception doesn't even apply to you. You have no penalty from which you need to be excused."
Put a rubberband around your wrist. Explain how it is landshark repellent. Offer him one, as well, to show you want him to be protected from landsharks. Oh, there is no such thing as a landshark? He still wants to be protected, right?
Don't yell at us; we're volunteers
