You'll know if it was a taxable event or not, when you get the 1099-R. If the 1099-R includes the penalty amount in the total reported in box 2a, then it's a taxable event. if the amount in box 2a is $35K less than the amount in box 1, then it's not a taxable event. To understand, you can see the 1099-R form at <a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-pdf/f1099r.pdf">https://www.irs.gov/pub/irs-pdf/f1099r.pdf</a>
