Any time that you take money out of your traditional IRA account, you must report that as taxable income on your return. If he has enough deductions from other sources, it may end up that he does not owe taxes on that $40,000 or on the entire amount, but the amount does need to be reported as part of his taxable income.
If he was under the age of 59-1/2 at the time the withdrawal was made, then he will owe an additional 10% early withdrawal penalty. That penalty is paid separately from regular income tax, and so no deductions apply to the penalty amount.
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