Let’s see if I can simplify the question…
When my parents took total distributions of their Roth IRAs, they were “qualified” distributions under the first-time homebuyers exception. This means:
Distributions of all contributions, i.e., $2,000 for each Roth IRA, are penalty-free. (By the very nature of Roth IRAs, both $2,000 contributions were already taxed.)
The $9,000 balance of my mother’s Roth IRA and $10,000 of my father’s Roth IRA were distributed penalty-free and tax-free.
$5,000 of my father’s Roth IRA distribution was taxable income.
When calculating the amount “Untaxed portions of IRA distributions and pensions”, my father does not want to include those amounts that were tax-free under the first-time homebuyers exception.
I think the amount in “Untaxed portions of IRA distributions and pensions” should have been the untaxed portion of the Roth IRAs that they used as a down-payment on the purchase of their first-time home.
He and I both agree that the two original post-tax contributions and the $5,000 reported as taxable income should be excluded.
Is he right or am I right?
Thanks!
G