Except that you are not attempting to purchase a primary residence. You are taking a deduction that would otherwise be prohibited, KNOWING that you do not intend to use it for the allowable purpose. Can you say, Fraud?
Let me get this straight, and I'm new to this site having googled this same post as a question, so what you are saying is that this person is fradulantly obtain his/her own money???
I'm not a good saver, that said, I elected for the 401k and I too am thinking of fradulantly obtaining some of MY MONEY out of my 401k. You can get a letter from your mortgage company when you've fallen behind on you payments to submit to your 401k in an attempt to tap into funds to save your home. I plan on doing that and instead doing a short sale and using the funds as downpayment for my mother-n-law to purchase the home in a short sale Instead of being upside down (owing $167 on a property that is now only acessed at $122) My mother-n-law can purchase it for about $60,000 and my mortgage will then be afforadable and I can keep it and live comfortably again. I've included it on a chapter 7 bankruptcy already, so it will not effect my credit and the short sale will avoid me having a forclosure on my report. I plan to use the $6,000 I'm taking as a hardship from my 401k to give to her as the 10% down on the home. So am I so horrible to take this money, MY MONEY, and essentially work the system a bit to my favor to keep my home and not be upside down in it, or is it "the right thing to do" and allow it to go into forclosure, become the banks problem, further negatively effecting the economy? Oh, and, it's a duplex, so I'd also have a family with 2 little kids homeless???
Thank you to the person who is saying, what makes sense to me, that the only thing the IRS is really concerned about ultimately is getting there 10% on penelties/fees etc... which I certainly intend on paying/reporting. I think it's crap that you can't access your money for whatever reason and just pay the damn penelty and be done.