Can I apply 2021 IRA home purchase exclusions to 2020 disaster distribution?

Forum|Forum|4 years ago
February 20, 2022
2 replies
14 views

I have a cx that purchased a home in 2021 and wants to apply the $10,000 exclusion to the allocation in the current year of IRA distribution taken in 2020 tax return but spread over the 3 years.

ProConnect Tax

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Best answer by IRonMaN

To get the three year spread, they had to have had a hardship because of COVID. If that wasn't the case they fraudulently withdrew the money last year. They can't have their cake and eat it too.

IRonMaN

Level 15

They got the money last year because of financial hardships caused by COVID and now they are saying they stuck the money in their sock drawer to buy a house? I don't think that is how it works.

Slava Ukraini!

T

tgdennisAuthor

Level 2

Understand some of that. They used some of the money to put the down payment on a house in 2020 and then when the house was complete in 2021, want to get the exclusion.

IRonMaNAnswer

Level 15

To get the three year spread, they had to have had a hardship because of COVID. If that wasn't the case they fraudulently withdrew the money last year. They can't have their cake and eat it too.

Slava Ukraini!

rbynaker

Level 13

I'm having trouble understanding how you can use the home-buyer exclusion to avoid a 10% penalty that was already avoided when it was a COVID distribution.

qbteachmt

Level 15

"how you can use the home-buyer exclusion to avoid a 10% penalty that was already avoided when it was a COVID distribution."

You can't. That's the point. The same money can't do two things. And 2020 money cannot change purpose in 2021 tax reporting. Home buyer exclusion isn't a deferrable reporting option, either.

You know what they say: Pick a lane.

Don't yell at us; we're volunteers

rbynaker

Level 13

@qbteachmt wrote:

You know what they say: Pick a lane.

Yep. I said that last night on the way home from dinner (well, more shouted it and there was a good bit of horn blowing as well).

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