Using a traditional IRA distribution for a first-home purchase exempts the distribution (up to $10,000) from the early-distribution penalty but not from the income tax. Click the Continue button on the page that lists the Forms 1099-R that you have entered and proceed to where TurboTax presents a page that asks about exceptions the the early distribution penalty.
Distributions from a Roth IRA are handled differently because under certain circumstances distributions used for a first-home purchase might also be exempt from income tax in addition to being exempt from the early-distribution penalty.
