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My wife (in her 40s) withdrew money from her Traditional IRA this year to purchase a new car. The mutual fund sent us a 1099R reflecting the withdrawal but did not specify the tax consequences.

I've heard that as long as you withdraw less than or equal to your original principle, the amount is simply taxed at your normal rate. Only monies exceeding the original principle are subject to the 10% early withdrawal penalty.

My question is three-fold:

1. Did I hear right?
2. If so, how and where do we report the withdrawal on our (filing joint) 1040. I'm using Turbo Tax Deluxe 2000 to do our taxes and am unsure where I should go in the program to report this?
3. If what I heard is wrong, how do we report the withdrawal on our 1040 and are we subject to the 10% early IRA withdrawal penalty?

Thanks & Cheers,
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