1099-R shows code 2

[mrichman333]

OK, please correct me if I am wrong.  A T/P has a 1099-R with code 2 in box 7. she is under 59 1/2.  My understanding is code 2 exempts her from the early penalty but not the tax.  Box 2 is blank and Taxable amount not determined is checked. 

[Jack from Ohio]

Box 2 is empty and "Taxable Amount Not Determined" is marked because the company handling the money has no clue if there is non-deductible basis in the account.

To accurately determine Box 2 amount, you must find out if and how much non-deductible basis she has in the retirement account, and pro-rate accordingly.

Code 2 DOES exempt her from penalty.

[mrichman333]

I believe it's a pension that she did not contribute to.  Last year her 90 year old father did her return and he showed it as not taxable at all, but he also showed $11,000 in medical expenses that they did not have.