use IRA to purchase first home without penalty?

['89cab]

I’m tubrotaxing my son and daughter-in-law’s taxes. They are likely to purchase their first home (in California) in the next few years. My son owns a rental property in North Carolina (purchased in 2006).

If they purchase traditional IRAs, my understanding is that they can withdraw the IRA funds without penalty to purchase their first home. Is this correct?

[spuggy]

My understanding is that early withdrawal from an IRA is ALWAYS due the tax that was deferred at the time it was paid into the IRA. Additionally, if you're withdrawing from the IRA early, there's an extra Federal penalty (think it's 10%) involved when taking out more than $10,000, and this is the penalty that's waived if you're using the funds to purchase your first home.

I'm not sure that the circumstances you describe would meet "first home" criteria. I'd seek professional advice from someone that knows what they're talking about..

[Porsche-O-Phile]

IIRC you can borrow against it (and a 401k) but it has to be paid back with interest within 5 years.