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Contributions always come out of Roth IRA's in a specific order. See Publication 590, page 67: "Ordering rules for distributions".

Since the dollars went in after tax, only gains in an IRA (or conversions) are taxable when taken in a nonqualified distribution.

In my example there would be a $5k contribution, and a $6k distribution of past contributions, reducing the cost basis within the Roth. That distribution would be completely tax free.

this is not a contribution removal of any sort, it is a contribution and then a distribution. Perhaps you missed that there is already a cost basis in the account of $20k.
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