There are two issues here. If you took a loan, until such point as it is deemed that you are not paying it back, it is not income. If that happens, you will receive a 1099-R with the balance of the loan amount.
Again, if it does happen, you will not be able to avoid paying the 10% penalty for early distribution because that exception is only available with an IRA.
Exceptions to the
additional 10% tax apply for early distributions from an IRA that are:
- Made to a
beneficiary or estate on account of the IRA owner's death
- Made on
account of disability
- Made as part
of a series of substantially equal periodic payments for your life (or
life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary
- Qualified
first-time homebuyer distributions
- Not in excess
of your qualified higher education expenses
- Not in excess
of certain medical insurance premiums paid while unemployed
- Not in excess
of your unreimbursed medical expenses that are more than a certain
percentage of your adjusted gross income
- Due to an IRS
levy, or
- A qualified
reservist distribution
