The funds withdrawn from an IRA will be taxable. Beyond rolling over the funds to another tax deferred account or making an Qualified Charitable Distribution, how you use the funds is not relevant. There is no tax exclusion for using the funds withdrawn as a gift.
If you make the withdrawal you will receive a Form 1099-R showing the amount withdrawn and the taxable amount withdrawn.
You do not report the gifts given on a tax return. Nor are the gifts received reported on a tax return.
If the gift given to an individual is greater than $18,000 then you would have to file a Form 709 with the IRS.
There would not be any gift taxes owed if the total of all gifts ever given is less than $13.61 million
TurboTax does not support IRS Form 709
