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I purchased a home in 7/99 and use a disbursement from my employer's profit sharing plan. I am confused as to whether this disbursement will be subject to the 10% penalty or not. The instructions to IRS Form 5329 say that I would be exempt from the penalty only if I used an IRA. Now, as I'm about to submit my 1040 via e-mail on turbotax.com it says that I am exempt from the penalty. Does anyone know the answer to this perplexing problem?
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<<I purchased a home in 7/99 and use a disbursement from my employer's profit sharing plan. I am confused as to whether this disbursement will be subject to the 10% penalty or not.>>

If you are under age 59 1/2, you bet that it'll be subject to the 10% penalty. The penalty relief for a first time homebuyer only accrues from an IRA...and not from a qualified plan.

<< The instructions to IRS Form 5329 say that I would be exempt from the penalty only if I used an IRA.>>

Yup...that's the way the law reads...

<< Now, as I'm about to submit my 1040 via e-mail on turbotax.com it says that I am exempt from the penalty. Does anyone know the answer to this perplexing problem?>>

I can't speak to what TurboTax says. But if you took a distribution from a qualified plan, the 10% penalty will apply. The penalty relief is from an IRA (either Roth or Traditional) only.

Sorry...
TMF Taxes
Roy
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