The code 2 in box 7 would be correct if he was under the age of 59 1/2 when the distribution was made.
Code 2 —Early distribution, exception applies (under age 59½)
This means that the distribution is Not subject to the 10% early distribution penalty.
There are no exemptions from federal income tax for distributions from a 401(k). The distribution is entered as ordinary income on the federal tax return.
