$20,000 of IRA Dist was applied to loan against taxpayers first home. Does this qualify as an exception?

[-daddylonglegs19]

no

[Opus 17]

A taxpayer can withdraw $10,000 from an IRA for a "first time" home purchase.  If married filing jointly, each spouse can withdraw $10,000, but one spouse can't withdraw $20,000.

A "first time" home purchase means you did not own the home you lived in as your main home within the 2 years before the closing date on the current home.  (That is, you could have owned a home but not lived in it as your main home, or maybe you didn;t own a home at all.)

You must use the money for qualified acquisition costs within 120 days of withdrawal.  Normally people take the money out before closing to help with downpayment or closing costs.  But I don't see that this is required.  Paying off the loan (as long as the loan was only used to buy this house) would seem to qualify even if you withdrew the money after you closed on the home.

You will still owe regular income tax, just not the 10% penalty for early withdrawal.