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Hardship Withdrawal Request under final regs


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I have a client whose home was destroyed in March by tornado.  With the cost of lumber going up so much - they need to take a distribution from their 401k to pay the additional expense to rebuild that insurance did not cover.  Could that be a reason for a hardship withdrawal or just an inservice with 20% withholding?  Rebuilding on the same lot.  Thanks!

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The rule is that it has to be for repair of damage to the participant's principal residence due to a casualty loss that would be deductible under sec. 165, but without regard to whether it was located within a federally declared disaster area. The situation you described sounds to me like it would qualify but I am not an expert on section 165.

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9 hours ago, C. B. Zeller said:

The rule is that it has to be for repair of damage to the participant's principal residence due to a casualty loss that would be deductible under sec. 165, but without regard to whether it was located within a federally declared disaster area.

You also disregard the sec 165 requirement that only losses in excess of 10% AGI are deductible 

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