- 17 -
section 72(p)(2)(A). Nonetheless, we conclude that, even if
respondent has not established that the renewed loan did not have
substantially level amortization, the renewed loan is a taxable
distribution to petitioners pursuant to section 72(p)(1)(A)
because the record establishes that the renewed loan exceeded
$50,000. At trial, the parties orally stipulated that, when the
original loan was due in 1988, the principal amount due; i.e.,
$50,000, and interest due thereon were not paid but instead were
rolled over into the renewed loan. Accordingly, as the amount of
the renewed loan was the sum of $50,000 plus the interest that
had accrued on the original loan, the amount of the renewed loan
necessarily exceeded $50,000. Consequently, we conclude that the
renewed loan does not meet the requirement of section
72(p)(2)(A), and we hold that the renewed loan is a taxable
distribution to petitioners pursuant to section 72(p)(1)(A) for
their 1988 taxable year.10
Lastly, we turn to the additions to tax determined by
respondent. In the notices of deficiency, respondent determined
that petitioners and the corporation are liable for additions to
tax pursuant to sections 6651, 6653, and 6661. Petitioners and
10 To the extent that a net operating loss results from the
parties' stipulations, the allowance of the Yorkville interest
expense deduction, and the inclusion of the renewed loan from the
pension plan in petitioners' gross income, petitioners shall be
entitled to a loss carryback from their 1988 taxable year to
their 1987 taxable year, which the parties must calculate in the
Rule 155 computations that we order below.
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