Is a withdrawal from an IRA originally funded by a direct rollover distribution from a qualified plan also eligible for the "first-time home buyer" exemption from the premature distribution penalty?

In other words, would a terminated plan participant requesting a cash distribution from his/her qualified plan account be better off doing a direct rollover to an IRA and then withdrawing his/her home-buying $s from the newly established rollover IRA - i.e., to avoid the penalty on the first $10,000 of the distribution?

Thanks!

As long as the use fo the $$ meets all the requirements of a "qualified first-time homebuyer distribution" (IRC Section 72(t)(8)), and the individual is eligible for a non-hardship distribution from the qualified plan, then Yes. The early distribution excise tax exemption you refer to is not available for a distribution from a qualified plan (IRC Section 72(t)(2)(F)).

True. As a rule of thumb, you should consider any rollover as taking on the characteristics of the plan the funds are being rolled into. This is a general rule of thumb.

Limited exceptions include rollovers into Governmental 457(b) plans, and direct rollovers into inherited IRAs.