Long story short...I have been renting a townhome since 1992 after sale of a principal residence due to a divorce settlement. I am living comfortably with investment dividends, interest, and Social Security benefits. I do not, however, have sufficient monies outside of my IRA to plunk down on a home purchase.

Is there a way to purchase a principal residence using a portion of my tax-deferred IRA holdings without it being taxed as "ordinary income" for the year of withdrawal? I don't know if there is a tax exemption for this in the tax code or not; if there is, would this be a sound idea for a single person in their sixties? If there is not such an exemption, wouldn't it be a great way to stimulate the economy by releasing large amounts of money into the home construction business?

The amount withdrawn from my IRA would not have enough impact on my IRA earnings to affect my life-style.

 Any thoughts or opinions appreciated...