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Author: lezamora1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: First Home IRA Distribution Date: 1/22/2000 10:51 AM
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Greetings Fooldom!

I know that Uncle Sammy allows me to withdraw up $10,000 from a Tradtional IRA towards a "first-time" home purchase. Furthermore, I know that in order to do similarly with a Roth IRA, the Roth IRA must be at least five years old.

Is there any such stipulation for the Traditional IRA first-time home purchase withdrawal? My Foolish plan is to convert some 401(k) money I happen to have at my disposal right now to a Traditional IRA and use it this summer to close on a house--if it can be done.

Thank you for your time. Fool on!
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25749 of 121061
Subject: Re: First Home IRA Distribution Date: 1/22/2000 4:02 PM
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<<I know that Uncle Sammy allows me to withdraw up $10,000 from a Tradtional IRA towards a "first-time" home purchase.>>

Right...with some restrictions. You can read more about the first time home purchase issues in the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). But these distributions will be subject to taxes. You'll simply avoid the penalties.

<< Furthermore, I know that in order to do similarly with a Roth IRA, the Roth IRA must be at least five years old.>>

Right again...but again with some restrictions. And again, this is discussed in detail in my series on Roth IRAs in the Taxes FAQ area. Unlike the traditional IRA rules, if you make a qualified distribution from your Roth IRA (hold for more than five tax years...which are different than five calendar years), any distribution would be free from tax AND penalties.

But even if you take a taxable distribution from your Roth IRA, if you meet the first time homebuyer qualifications, you'll still dodge the penalty.

<<Is there any such stipulation for the Traditional IRA first-time home purchase withdrawal?>>

Nope. Any distributions from a traditional IRA would be subject to tax based upon the IRA distribution rules. All you'll avoid is the penalty.

<< My Foolish plan is to convert some 401(k) money I happen to have at my disposal right now to a Traditional IRA and use it this summer to close on a house--if it can be done.>>

Sure it can be done. You'll avoid the penalty. You'll not avoid the tax. The only way that you would avoid both the tax and the penalty would be to take your traditional IRA, convert it to a Roth IRA (and pay taxes on the conversion income in the year of conversion), wait five tax years, and then take the distribution.

But either way you'll be paying the tax...it's just a question of when.

TMF Taxes
Roy



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Author: joyjoyga Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29650 of 121061
Subject: Re: First Home IRA Distribution Date: 2/22/2000 7:16 PM
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I've read the faq, the Fool tax guide 2000 (*where I found this info in the first place) and anything else I can find, but I have one more question that I can't seem to get answered.

I rolled a 401k into a traditional IRA and then took part of the rollover from the IRA to use as a down payment on a house, and I do qualify as a first time homebuyer. What forms do I need to fill out to show that I bought a house and do not have to pay the extra penalty?

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