This year I received $10,000 out of my traditional IRA as part of a first time home purchase. I did receive deductions when I contributed to my traditional IRA. I realize that I will not have to pay the 10% penalty, but have read several times that I will have to pay normal taxes on my distributions. I'm not exactly sure what this last part means. Does this mean I have to recognize the capital gains on the distribution or does the full distribution amount go into income for next years return? Any help is appreciated.