Could either of these issues be the problem?:
The first-time buyer exemption applies only to the 10% early withdrawal penalty, not to the income tax due on the IRA distribution.
Also, "first time buyer" means that you (or your spouse, if married), cannot have had any ownership interest in a principal residence during the two-year period ending on the date of acquisition of the property in question.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
