No. 3: John and Mary Richard entered into a binding contract to purchase their first home on July 15, 2021 for $120,000. John in anticipation of an August closing and move in date received a distribution of $15,000 on July 16, 2021 from his qualified retirement account (401k) administered by National Alliance Co. These funds would be used to cover appropriate closing costs. Due to circumstances beyond the control of both the Richards and Mortgage Company, John and Mary were not able to close and move in until November 20, 2021. In January of 2021 John received a 1099-R detailing the distribution from National Alliance. On his federal income tax return for 2021, John