To qualify for that exemption, you are also required to attach a statement to your mailed paper return (there is no way to attach the statement to a e-file) See IRS form 5329 instructions page 2.
https://www.irs.gov/pub/irs-pdf/i5329.pdf
Quote from the 5329 instructions:
A qualified distribution from a retirement plan for the birth or adoption of a child of up to $5,000 if made during the 1-year period beginning on the date your child was born or adopted. Attach a statement that provides the name, age, and TIN of the child or eligible adoptee.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
