I found the problem. The 1099-r distribution codes make no difference on form 5329. I'm guessing those codes are just for auditing purposes. What actually makes the difference is another section in TurboTax where it asks about prior year excess contributions. TurboTax had transferred over the excess that I had recorded in prior years. I changed it to 0 and that eliminated form 5329 and the 6% penalty.
