@fanfare , following the law with regard to distributions from IRAs is always the responsibility of the participant. Distributing $7,000 for a return of a $7,000 contribution when the IRA has incurred losses in the interim is not following the law with regard to a return of contribution before the due date of the tax return, which is what code 8 is reporting. Claiming on the required explanation statement that there were no losses so as to correspond to the reporting of a $7,000 code-8 distribution would be fraudulent when you know that there were losses. Doing so would report the distribution as entirely nontaxable when the amount in excess of what should have been distributed is actually subject to taxation. Lying on your tax return such that you avoid paying required taxes is clearly tax fraud.
