A taxpayer who takes a distribution from a traditional IRA in which they previously made nondeductible contributions must:

1. Report the entire amount as a taxable distribution on Form 1040.
2. Use Form 8606, Nondeductible IRAs, to compute the taxable portion of their distribution.
3. Use the general rule to compute the taxable portion of their distribution.
4. Use the simplified method to compute the taxable portion of their distribution.